New impetus required for full recovery

The first session of the 15th National Assembly (NA) will be kicked off on July 20. Besides perfecting the personnel apparatus for the government and the NA, the session will also place a big focus on some crucial issues related to the national economic development – assisting the business community to weather woes caused by COVID-19 and enhancing the role of the private sector in the economy for the 2021-2025 period.

One of the biggest outcomes of the session will be the discussion and approval by the NA of a major resolution on socioeconomic development for 2021-2025, which may set a high economic growth rate of 6.5-7 per cent per annum (see box for details), with Vietnam set to become a higher middle-income nation by 2025.

The draft resolution stated, “Efforts are to be made to implement the dual task – fighting the COVID-19 pandemic and quickening socioeconomic recovery, with priorities to be based on realities.”

Furthermore, the draft resolution also states, “Large private groups must be founded and developed, with strengths able to compete in the regional and international markets,” and “efforts are to be made to create 1.5 million operational enterprises by 2025, with private enterprises to generate 55 per cent of GDP.”

Supporting enterprises

Last week, the European Chamber of Commerce in Vietnam (EuroCham) released its quarterly Business Climate Index (BCI), with results showing that the fourth wave of COVID-19 in Vietnam has knocked the confidence of European businesses’ leaders.

“Before the fourth wave struck, the BCI had almost climbed back to pre-pandemic levels, reaching 73.9 in Q1. However, this latest outbreak and the spread of new variants have seen the index fall almost 30 points in the second quarter to 45.8. This is a significant drop, though not as steep as during the first outbreak of the pandemic in 2020,” said the BCI report.

“The latest wave has also led to increased pessimism about the short-term outlook of Vietnam’s business environment. Just one-fifth of EuroCham members (19 per cent) believe that the economy will stabilise and improve in the next quarter. That’s down from almost two-thirds (61 per cent) in the first quarter.”

The BCI also showed the urgent need for Vietnam to roll out a mass vaccination programmes. More than half of the business leaders (58 per cent) predicted that their companies would see a significant, negative impact if their staff could not be vaccinated in 2021. Meanwhile, almost half (44 per cent) have not been approached to prepare for vaccination.

The American Chamber of Commerce in Hanoi (AmCham) also released a survey over their members about the business impact of the ongoing coronavirus outbreak in Vietnam. The survey focused on business operations, travel and activity restrictions, burdensome procedures for in-bound arrivals, and the availability of vaccines in Vietnam.

“The outbreak is causing anxiety and uncertainty across all business sectors in Vietnam,” AmCham’s executive director Adam Sitkoff told VIR. “Over 90 per cent of AmCham’s members responding to the survey said the current outbreak has affected their business operations here.”

The biggest challenges are a lack of available vaccine to protect their team members, and not being able to bring necessary people here due to burdensome travel requirements and paperwork. Over 70 per cent of respondents said their companies are currently restricting work travel in Vietnam. Around 90 per cent of AmCham members have cancelled work or personal travel due to COVID-19.

In a specific case, a major US-backed animal feed producer in Vietnam is now scratching its head as it has to have its over 1,500 employers vaccinated at many sites nationwide.

“We are eagerly awaiting to be vaccinated,” said a company’s representative declining to be named. “The inoculation delay has badly affected the company’s business and production performance.”

Currently, many overseas businesses like this company are facing numerous difficulties in policies.

“The discrepancies in implementation of policies and coordination among some state bodies are confusing businesses. Some regulations have a rushed execution roadmap that makes it hard for businesses to adapt to the changes,” the representative said. “This creates difficulties for well-complying businesses while creating a loophole for non-conforming ones. This is to some extent going against the government’s policy of creating a transparent, fair, and healthily competitive investment environment.”

According to the General Statistics Office, in the first six months, about 70,200 businesses halted operations, waited for disbandment, and completed bankruptcy procedures – up 24.9 per cent on-year. Each month saw an average of 11,700 firms withdraw from the market.

“Businesses are facing great woes. They urgently need major support for recovery,” said Minister of Planning and Investment Nguyen Chi Dung.

In a specific case, Nguyen Van Tuan, director of Nam Phuc Tourist Co., Ltd. in Hanoi, told VIR that the company’s last group of foreign tourists had left Vietnam in March 2020 after using the company’s tourism services. “Since then, like many other travel firms, we have been unable to sell tours to any customers, while we are still having to pay salaries to our employees,” Tuan said. “We are now depending on a ticket service, but it is very difficult due to travel restrictions. Losses are huge.”

Fostering the private sector

The government last week sent a 2021-2025 socioeconomic development report to the NA Standing Committee, stating that in the next five years, the private sector – including local and foreign enterprises, as well as household businesses – “will be developed into a really important propellant of the economy”.

“The development of the private sector must be encouraged strongly, especially in manufacturing and processing, digital technology, and IT, with the formation of domestic and international supply chains and value chains,” the report stated. “There will be the development of some key telecommunications and IT firms which will lead the country’s technological development, laying the groundwork for the development of a digital government, economy, and society.”

The government said all best conditions are to be made for the private sector to strongly develop both in scale and quality.

Given the country’s increasing integration in the global economy and its growing scale, the private sector’s role is all the more enhanced.

By late last year, Vietnam had nearly 800,000 operational enterprises, of which 98 per cent are small and medium ones. The private sector creates up to 42.68 per cent of GDP, over 50 per cent of economic growth, 30 per cent of the state budget revenue, and 85 per cent of the labour force.