All policies on table to ignite enterprises

The National Assembly will this week discuss how to provide more jobs for Vietnam’s citizens, Photo: Le Toan

Over the past seven months, Nguyen Duc Minh has been in a lurch to feed his 4-member family, with his wife having had to stop working since late last year for a garment company in Hanoi.

Before that time, Minh had been working for a Japanese company based in the capital’s Thang Long Industrial Park for four years. However, the company, producing electronics and plastics equipment, has made a staff cutback of 150 employees including Minh, whose monthly income was about VND7 million ($300).

“The company had to reduce production caused by a decrease in export orders from Japan, South Korea, and some European markets,” Minh said. “I hope to be employed again by the company as I learned that the company is going to recover.”

In Dong Anh district’s Kim Chung commune, home to Minh’s family, thousands of unemployed people are commonly seen now. They used to work in Thang Long Industrial Park but also in such industrial zones as Quang Minh and Dong Anh in the same district.

According to the General Statistics Office (GSO), last year, the pandemic drove many labourers in Vietnam into great woes, with an unemployment rate of 3.22 per cent, equivalent to 3.15 million people. Over 2.2 million labourers left their companies due to staff cutbacks for their localities, including 524,000 people in Ho Chi Minh City and 447,000 people in Hanoi.

In the first four months of 2022, though such a rate was not reported, the economy saw 61,540 enterprises halt operations, await to conduct bankruptcy procedures, and already disband – up 19.5 per cent on-year. On average, if each enterprise employs 20 labourers, the total number of unemployed labourers is over 1.23 million people.

Uncertainties

The government has warned that the economy is facing looming risks, and if the pandemic continues prolonging at a severe level, the economy will not only continue seeing many people unemployed but it will also be affected in terms of production and exports due to disrupted supply chains.

“The existing prices of petrol and indispensable goods and consumption services are still very high. Moreover, there are major risks in consumption and production supply chains in China, in addition to great fluctuations in the domestic stock market. These factors are undermining Vietnam’s growth recovery, macroeconomic stability, and the life of poor and low-income people,” said a governmental report on Vietnam’s socioeconomic situation sent to the National Assembly Standing Committee last week.

“The economy is facing multiple uncertainties on big balances such as electricity and petrol, and there is a big risk of power shortages this summer. Great pressure of inflation is escalating amid domestic demand beginning to recover, in addition to rises in prices of input materials, transportation costs, and logistics, and risks in disruptions for material supplies from China,” said the report. “Besides natural disasters occurring abnormally, these pressures will undermine enterprises’ recovery and effectiveness of supporting policies already enacted.”

In April, many international organisations reduced Vietnam’s economic growth outlook for 2022, such as the World Bank (5.3 per cent for the baseline scenario and 4 per cent in a worse scenario); the Asian Development Bank (6.5 per cent), and HSBC (6.2 per cent – down from its previous prediction of 6.5 per cent).

“Vietnam’s economy is now quite open to the world, thus any fluctuations in the global market such as high inflation, high prices of materials, and supply chain disruptions can have negative impacts on the country’s macroeconomic stability, economic growth, inflation, and people’s incomes,” said Minister of Planning and Investment Nguyen Chi Dung.

According to the GSO, Vietnam’s total export-import turnover last year was $668.55 billion, or 1.8 times higher than the GDP of $362.6 billion. Total export revenue reached $336.31 billion, up 19 per cent on-year, and import value hit $332.23 billion – up 26.5 per cent on-year.

The government underlined that the continued hike in global oil prices since February has been having a domino effect on costs of transportation, logistics, and prices of many types of goods in the domestic market. It cited Goldman Sachs forecasting the global oil price per barrel may increase to $125 in Q3 2022 from the existing average of $105.

The consumer price index for April increased 2.09 per cent over that in late 2021, almost doubling that of the same period during 2018-2021 – greatly pressurising the government’s macroeconomic monitoring and inflation control for the entire 2022 and undermining the effectiveness of policies on assisting individuals and enterprises.

According to the Central Institute for Economic Management (CIEM), as the oil prices rose, households have had to spend more on travel every day, consequently forcing them to cut consumption of other goods or reduce savings. The increased freight rates also cause the prices of consumer goods to be high.

“Therefore, consumers would have to face double disadvantages from energy expenditure. This would contribute to limiting consumption and curtailing production, which can stagnate the economy’s growth, with the state coffers finding it difficult to increase tax revenues of consumer goods,” said a CIEM expert.

Remedies

It is expected that more support for struggling enterprises and unemployed people in Vietnam will be looked over at the 15th National Assembly’s (NA) third session, scheduled to begin on May 23.

The legislature will discuss the results of updated reports on implementing the socioeconomic development plan and state budget in 2021 and solutions for implementing the same plan for this year. The NA is also expected to debate how to assist enterprises hurt by the health crisis and provide sufficient jobs for unemployed people.

NA deputy Vu Tien Loc, representing the northern province of Thai Binh, stressed that enterprises are still bogged down in great difficulties, especially small- and medium-sized enterprises and mostly those operating in the sectors of service and production.

“In the service sector, besides financial, banking, and insurance services, other types of services are facing massive woes. Many firms in the sectors of tourism, aviation, restaurants, hotels, and transport are weak. It is likely that many of these enterprises will be unable to recover after the pandemic ends, if no more practical and strong support solutions are taken,” said Loc.

The Government Office a few weeks ago released Announcement No.128/TB-VPCP dated April 27 on Deputy Prime Minister Vu Duc Dam’s conclusion at a meeting between him and related ministries, agencies, and localities on solutions to provide sufficient employment for enterprises.

The government will review all policies used for supporting enterprises and labourers – such as Resolution No.68/NQ-CP dated July 2021 on policies to support pandemic-hit employees and employers and the country’s Socioeconomic Recovery and Development, so that more sturdy solutions can be taken soon.

For example, under Resolution 68, employees working under the labour contract are suspended from employment according to the Labour Code and following the medical isolation instruction or living in locked-down areas according to the request of competent authority from above 14 days during the duration from May 1 to December 31 this year, and participating in compulsory social insurance up to the time right before employment suspension are entitled to one-time support of VND1 million ($43.50) per person.

However, like many unemployed people, Nguyen Duc Minh in Dong Anh district lamented that he did not know how to access and benefit from these programmes.

“I have heard about the packages in the media. Several times I have talked with the authorities in the locality, and they also said they barely know anything about the packages,” Minh said.

For example, he said, the government has since April 2020 offered a VND62 trillion ($2.69 billion) package to support the unemployed, but those like him have never been able to touch it.

“What we need now is stable employment to feed my family. Over the past few months, my wife and I have become temporarily hired labourers but the work is off and on. We do what other families require from us, such as painting or being house cleaners, without social insurance.”