People and enterprises feel the pinch of pandemic effects

A huge number of companies are having to operate with a reduced workforce. Photo: Le Toan

Over the past four months, Nguyen Xuan Tuyen has had nothing to do to feed his four-member family, with his wife having had to stop working as a vendor in the inner city of Hanoi due to travelling restrictions caused by the ongoing pandemic.

Before April, Tuyen had been working for a Japanese company based in Hanoi’s Thang Long

Industrial Zone (IZ) for five years. However, the company, producing electronics and plastics equipment, has made a staff cutback of 100 employees including Tuyen, whose monthly income was about VND8 million ($350).

Like many other employees of the company suffering the cutback, Tuyen lives in Hanoi’s rural Dong Anh district, which is connected to the city centre by the Nhat Tan Bridge, funded by Japan’s official development assistance.

“Our company has had to shrink production caused by a reduction in export orders from Japan and South Korea,” Tuyen told VIR. “Now I hope to be employed again by the company or I will have to seek another job.”

In Kim Chung commune, home to his family, thousands of unemployed people like Tuyen are commonly seen now. They used to work not only in Thang Long IZ but also in other IZs including Quang Minh and Dong Anh in the district.

According to the Hanoi Centre for Employment Services, since early this year the centre has received about 1,500 registrations every day on taking up unemployment insurance and receiving job announcements.

Nguyen Cong Bang, director of Hanoian foodstuff producer Cong Bang JSC, said that his company used to have 300 employees.

“However, COVID-19 has hurt our business and we have had to lay off 150 workers. Now we want to access preferential loans, but the procedures and conditions are quite complicated, and we think we will never be able to approach such a kind of loan,” Bang said. “We have had to resort to loans from other sources to secure our business.”

According to the General Statistics Office (GSO), in the first seven months of 2021, the pandemic forced about 79,900 enterprises, both local and foreign ones, to halt performance and completed procedures for dissolution, up 25.5 per cent on-year. On average, nearly 11,400 enterprises left the market every month.

The number of unemployed people of working age in Q2 of 2021 reached nearly 1.2 million, up by just over 87,000 people over Q1.

Vietnam currently has 870,000 operational businesses, of which about 97 per cent are small- and medium-sized enterprises (SMEs). In the first seven months of 2021, Vietnam saw about 75,800 enterprises newly established, with total registered capital of VND1.06 quadrillion ($46 billion) and employing 555,500 new labourers, up 0.8 per cent in the number of enterprises, and 13.8 per cent in registered capital, but down 7.2 per cent in the number of labourers.

Call for help

At last week’s discussion by the National Assembly, many deputies have called for the government to find timely solutions to deal with how to provide sufficient employment for millions of people kicked out of work due to companies’ shutting down or shrinking operations.

“Hundreds of thousands of people in Cao Bang are out of work due to COVID-19. This has led to more massive woes in the life of people here, especially those living along borders,” said deputy Doan Thi Le An, representing the northern mountainous province of Cao Bang. “Cross-border trading activities have almost been halted, with many workers returning to their localities without employment and income.”

Echoing this view, deputy Nguyen Thị Viet Nga representing the northern province of Hai Duong said that COVID-19 has damaged living, working, and studying activities, with isolation and lockdowns seen in many localities nationwide.

“Simple demands in normal times previously have become a luxury now. Many people and businesses have had to apply for online activities, which are not totally effective. Production firms need physical activities,” Nga said.

Meanwhile, deputy Vu Tien Loc representing Hanoi stressed, “Businesses are now bogged down in great difficulties, especially SMEs – mostly those which are operating in the service sector.”

In this sector, Loc added, besides financial, banking, and insurance services, other types of services are facing massive problems. “Many firms in tourism, aviation, restaurants, hotels, and transport are dying away. It is likely that many of these will be unable to recover after the pandemic ends if no more practical or strong support solutions are taken,” said Loc, who is also chairman of the Vietnam Chamber of Commerce and Industry representing the interests of the domestic business community.

According to the Ministry of Labour, Invalids, and Social Affairs (MoLISA), currently, Vietnam’s unemployment rate is 2.52 per cent. Since early this year, many sectors’ growth in the economy has declined on-year, such as tourism (54.8 per cent), hotels (2.7 per cent), and transport (0.7 per cent).

“The pandemic has attacked our IZs and export processing zones, which are our important economic pillar and use millions of labourers,” said MoLISA Minister Dao Ngoc Dung. “Some IZs have had to halt operations such as Bac Giang closing operations of four IZs affecting 322 businesses using 150,000 labourers, and Bac Ninh seeing 42,000 labourers become unemployed. The fate of other tens of millions of labourers has become similar in Ho Chi Minh City, Hanoi, Danang, and Vinh Phuc.”

Bigger solutions

According to Minister of Finance Ho Duc Phoc, the ministry has allocated VND5.16 trillion ($224.3 million) to the fight against COVID-19 and built a vaccine fund with VND8.3 trillion ($360.87 million) so far.

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

“The MoF has been assigned to design a new support package related to taxes and fees, estimated at VND24 trillion ($1.04 billion),” Phoc said. If realised, this would be the second rescue package for the economy that is initiated by the new government, following a recently-released social package worth VND26 trillion ($1.13 billion) for workers and businesses.

“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 issued in June 2021 offering guidelines on VAT, personal income tax (PIT), and tax administration for business households. It was due to take effect on August 1, 2021.

Specifically, a VAT rate of 5 per cent and a PIT rate of 2 per cent shall be applied to sauna, massage parlors, karaoke bars, nightclubs, billiard halls, internet and gaming cafes; tailoring and laundry services, and hairdressing; other repair services including that of computers and household appliances; legal consulting, financial consulting, accounting, and auditing; and services of implementation of administrative procedures related to tax and customs.

Meanwhile, Minister of Planning and Investment Nguyen Chi Dung said the pandemic developments are very complicated and enterprises are in major difficulties. “The MoF and the State Bank of Vietnam are also considering the next support packages,” he said. “Regarding solutions for the coming time, a special task force with the minister of planning and investment as a permanent member will be set up. The task force is in charge of detecting and solving procedural problems at projects in all economic sectors to create the most favourable business environment.”

The government wants to apply policies that allow enterprises to delay the tax and fee payment at a maximum level; create a ‘green passage’ mechanism to pave the way for goods to circulate smoothly; and speed up vaccinations for workers in IZs, aviation, tourism, and accommodation sectors, Minister Dung said.

Since the second quarter of 2020, the government has also been utilising some drastic measures to support businesses. For instance, the SBV has been deploying a package worth VND180 trillion ($7.82 billion) for businesses and households, in the form of debt payment deferral and preferential loans. Most recently, on April 19, the government signed and issued Decree No.52/2021/ND-CP on the extension of time limits for payment of VAT, corporate income tax, PIT, and land rental in 2021. The total size of the package was estimated at VND115 trillion ($5 billion).

However, like many unemployed people, Nguyen Xuan Tuyen lamented that he does not know how to benefit from these packages.

“I have heard about the packages on the media. But several times I have talked with the authorities in the locality, and they said they barely know about how to access them,” Tuyen said.

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

According to the MoLISA, as of May this year, only VND13.1 trillion ($569.5 million) of this package was disbursed, due to various complicated procedures.