Leading sectors remain in doldrums

Illustration photo. Source: freepik.com

In a report on business development in 2020 and the first five months of 2021 drafted by the Ministry of Planning and Investment (MPI), the eight most affected by the pandemic include tourism, catering, accommodation; textiles and garments; retail; mechanics, manufacturing, and automobiles; agro-forestry-fisheries; transport and logistics; aviation; and IT and telecommunications.

To restructure loans and support interest rates of these businesses, the MPI has asked the State Bank of Vietnam (SBV) to amend and supplement Circular No. 01/2020/TT-NHNN dated March 13, 2020 on debt rescheduling, exemption or reduction of interest and fees to allow debt restructuring and rescheduling for the ones arising in the 2020-2021 period, and not move debt groups until the end of 2021. The SBV should direct commercial banks to reduce the interest rate by 3-5 per cent, delay deadlines, and provide new loans for businesses.

The MPI also suggests the SBV to amend and supplement Resolution No.84/2020/NQ-CP dated May 2020 regarding tasks and solutions to remove difficulties in production and business and to expand subjects entitled to a 2-per-cent reduction in interest rate, applied to all enterprises directly hit by COVID-19.

The MPI’s draft report also proposes the Ministry of Finance (MoF) to submit a 30-per-cent decrease of corporate income tax in 2021 for businesses and cooperatives that generated less than VND200 billion ($8.7 million) in 2020, as well as reduce 15 per cent of land rental for those who have stopped working for 15 days or more due to the pandemic.

The MoF should also cut down 50 per cent of VAT in 2021 for companies in aviation, catering, and accommodation sectors, and remove VAT for six months for transport businesses, as well as decrease 50 per cent of registration fees for newly registered cars for transport businesses.

The MPI proposes to cease social insurance payments for those hit by COVID-19 until end-2021, extend the payment of union fees and decrease of these by 50 per cent in 2021, as well as remove road maintenance fees for transport businesses until the end of the year.

Hit by COVID-19 since last year, the aviation market has dropped most seriously. The transport volume of aviation in 2020 was reduced by up to 65.9 per cent, and revenues declined by 61 per cent on-year.

During the Lunar New Year, revenues even decreased by 80 per cent on-year, and forecasts remain gloomy. “If the health crisis is managed, aviation could resume growth, perhaps, in 2024,” a representative of Vietnam Airlines said.

At present, overdue debts of Vietnam Airlines have expanded to VND6.24 trillion ($271.3 million), and the airline is close to bankruptcy. “Commercial banks have yet to see the disbursement of the bailout package for Vietnam Airlines, so they do not provide additional loans, extend, and re-grant credit limits,” the representative complained.

Meanwhile, Vietjet and Bamboo Airways have tried to optimise and maintain business. However, they are gradually running out of funds. Vietjet is estimated to require $435 million to maintain its operation.

In addition to aviation, tourism, catering, and accommodation are witnessing a halt of 90 per cent of companies, with the remainder operating in slow motion. Tour agencies and ticket agents mostly let all employees quit, while 60-90 per cent of employees of international travel businesses had to leave too, according to the Vietnam Tourism Association.

COVID-19 also hit the textile and garment industry seriously, which reported the first negative growth in 2020 (-10.5 per cent) over the last 25 years. Its export value last year was $35 billion only, a decrease of $4 billion on-year. More challenges are ahead, as old orders and reserves are running out.