10.08.2021, 12:48

Struggling production in need of further support


The business community is now bogged down in difficulties and in need of greater support from the state   

NDO - The health crisis is sabotaging domestic production, with the business community now in critical need of further support. The government has been urged to offer more effective remedies to succour enterprises and labourers.

Over the past few months, Samsung Electronics from the Republic of Korea (ROK) has been facing production difficulties at its home appliance manufacturing facility in Ho Chi Minh City.

The latest wave of COVID-19 has driven not only Samsung into suspended operations, but also many other businesses in the city.

It has been reported that Samsung's operating rate at its home appliance manufacturing facility in Ho Chi Minh City has fallen below 40% due to the pandemic.

Employing as many as 7,000 workers, the facility manufactures TVs and monitors, and home appliances such as vacuum cleaners and washing machines.

Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, said that the over 9,300 ROK enterprises in Vietnam employing over one million workers have been hurt by the pandemic, with untold losses.

"I think the situation may be worse if COVID-19 continues without any boost in vaccination," Sun said.

Minister of Planning and Investment Nguyen Chi Dung commented that Vietnam currently has 870,000 operational businesses, of which about 97% are small and medium-sized enterprises, with very low competitiveness and capacity.

"Meanwhile, their supply chains are being disrupted and their orders and output have also been slashed," Dung said. "Also, their production costs are highly rising due to a big hike in prices of input materials and logistics services. Notably, they are now having to pay more money for preventing COVID-19."

According to the minister, many enterprises are now facing risks of insolvency and halted operations. In 2020, the rate of businesses with profits was 33.86%.

In the first seven months of 2021, the pandemic forced about 79,700 enterprises, both local and foreign ones, to halt performance and completed procedures for dissolution, up 25.5% year-on-year. On average, nearly 11,400 enterprises left the market every month.

At an online conference on August 8 between the government and representatives from enterprises, business associations, and localities across the country on solutions to help weather the storm and increase production and business activities of businesses, Prime Minister Pham Minh Chinh stressed that the business community in Vietnam is facing massive woes caused by social distancing measures due to COVID-19.

Participants underlined difficulties including shortages of materials; growing transport costs; disruptions in production, consumption, supply chains, and exportation. In addition, difficulties have also been found regarding the marketing of goods, shortages of local and foreign experts, and access to support policies of the state.

At present, the entire southern region, including Ho Chi Minh City and some industrial hubs like Binh Duong and Dong Nai, is under strict social distancing, with thousands of enterprises exposed to the aftermath caused by COVID-19. It is reported that the recent COVID-19 wave has forced 70 out of 254 enterprises in Ho Chi Minh City to halted performance, while 36 business sites located in the Mekong Delta province of Long An have suspended operations.

Meanwhile, some industrial hubs in the north such as Thai Nguyen, Bac Ninh, and Bac Giang have yet to recover from the health crisis which recently forced them to temporarily shut down many industrial parks where hundreds of thousands of workers an employed.

According to the Ministry of Industry and Trade, the index for industrial production (IIP) of Bac Giang in May, June, and July declined 26.7%, 49.8%, and 15.3% year- on-year, respectively, while that of Bac Ninh climbed 23.9% year-on-year in May, declined 8.6% in June, and expanded 1.1% compared to the same period last year.

The General Statistics Office (GSO) reported that the fourth conoravirus wave has seriously damaged the Vietnamese economy.

"COVID-19 with a new variant has become all the more complicated, and it has had negative impacts on industrial production in July and the first seven months of 2021," said a GSO report on the economic situation in the first seven months of this year.

Specifically, the economy's IIP in July swelled 1.8% month-on-month and 2.2% year-year-on-year, marking the lowest expansion in the last seven months. The seven-month IIP went up by 7.9% year-on-year, far higher than that of only 2.6% year-on-year in the corresponding period last year, but still lower than that of 9.4% in the first seven months of 2019.

In the first seven months of this year, the manufacturing and processing climbed 9.9% year-on-year; while production and distribution of electricity rose 8.2%, and mineral exploitation went down by 6.3% year-on-year, leading to a 1% decrease in industrial production.

Waiting for more remedies

According to Minister of Finance Ho Duc Phoc, in addition to the VND26 trillion (US$1.13 billion) support package being implemented, the ministry has allocated VND5.16 trillion (US$224.3 million) to the fight against the pandemic and built up a vaccine fund with VND8.3 trillion (US$360.87 million).

The Ministry of Finance (MoF) has disbursed as much as VND8.18 trillion (US$355.6 million) for the Ministry of Health to buy 91 million vaccine doses, and the MoF is following procedures to disburse a further VND12.28 trillion (US$533.9 million) for the same purpose.

"The government has also assigned the MoF to devise a new support package related to taxes and fees, estimated at VND24 trillion (US$1.04 billion)," Phoc said.

If materialised, this will be the second rescue package for the economy initiated by the new government, following a recently enacted social package worth VND26 trillion (US$1.13 billion) for workers and enterprises.

"The MoF has also proposed the delay of the implementation of Circular 40 on taxation until January 1, 2022," Phoc said.

Circular No. 40/2021/TT-BTC was promulgated in June 2021 offering guidelines on value-added tax (VAT), personal income tax (PIT), and tax administration for business households. This circular took effect on August 1, 2021.

Specifically, a VAT rate of 5% and a PIT rate of 2% shall be applied to services of sauna, massage, karaoke, discos, billiards, internet, and games; tailoring and laundry services, and hair cutting, styling and shampoo services; other repair services including repair of computers and household appliances; services of legal consulting, financial consulting, accounting, audit; and services in the implementation of administrative procedures related to tax and customs.

Hard nut to crack

Currently, more than 9.4 million vaccine doses have been administered nationwide. Minister Nguyen Chi Dung recently told the National Assembly that the toughest job for the government from now until the year's end will be controlling and pushing back COVID-19, especially in big cities and localities having IZs.

"This is the first and foremost task, which is a prerequisite for beefing up economic growth and ensuring social security. To do this, we must accelerate COVID-19 vaccination," Dung said,

The Asian Development Bank supposed that vaccination delays and an extended social distancing in Vietnam's largest growth area may restrict mobility and limit economic activity in this year. In reality, mobility restrictions drove the composite Purchasing Managers' Index down to 44.1 in June 2021, the lowest reading since May 2020.

Prime Minister Pham Minh Chinh noted that it will be a very difficult job to realise the goal of having economic growth at 6-6.5% for 2021.

"We must remain well aware that challenges will be far bigger than opportunities. Efforts are to be made to overcome all difficulties to hit the goal," he stressed.

According to the World Bank, looking ahead, close attention should be paid to the evolution of industrial production and retail sales as both could be further affected by the COVID-19 fourth outbreak. Exports may also suffer from the slowdown of activities in some industrial parks.

"If the current outbreak is not contained quickly, the government may wish to consider adopting a more accommodative fiscal stance to support the affected people and businesses and to stimulate domestic demand," said the recently released World Bank bulletin.


Top News