Stimulus welcomed as Vietnam accelerates economic reactivation

May 21, 2020 | 10:00
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The ongoing pandemic has completely upended lives and economies across the planet, restricting movement, shutting schools, forcing people to work from home, and jeopardising employment for millions. With that, the US business community is thankful that Vietnam’s leadership has taken serious and appropriate steps to mitigate the damage from this terrible virus.
stimulus welcomed as vietnam accelerates economic reactivation
Adam Sitkoff - Executive director American Chamber of Commerce in Hanoi

The strict measures understandably frustrate many people, but the government’s actions have effectively contained the spread of the virus so far. Success is not just about case numbers – it is about creating a sense of security so that people feel comfortable that the person serving their food, or working next to them, is not a danger. In Vietnam, that feeling of security is coming back and it is something all of us are grateful for.

People certainly understand the inevitable tension between containing the spread of the virus and the need to allow economic activity. Decisions by government leaders on when and how to reopen, what level of movement and activity is safe, and how to reactivate important sectors like travel, tourism and hospitality, are some the most difficult policy decisions people have faced in our lifetimes.

We are all looking for the safest way to get back to business but make no mistake, opening the economy involves risk. Right now, we are all navigating this zone of uncertainty as we experience Vietnam reopening after it seems no longer reckless to do so, but before it is perfectly safe to do so. The economic implications of the pandemic for Vietnam are severe and will affect us for quite some time. Millions of jobs have disappeared, many people have seen their salaries cut, and business activity in most sectors remains slow. As we move towards economic recovery, the financial pressure for many companies will be significant.

Our members welcome the announcements of stimulus and support packages applying to a list of industries the government says are greatly impacted such as passenger transport, tourism accommodation, restaurants, and some other fields. However, there are some business sectors that were overlooked and we are working with our partners in the government to consider a more comprehensive list of industry sectors eligible for government support.

We also encourage the government to look at the effectiveness of different support initiatives. For example, while deferring some taxes and insurances is beneficial to some, many businesses see only limited assistance from these programmes. Small businesses need loans to stay alive. We hear from many businesses that are unable to access low interest loans under the government’s loan support package because banks have been rejecting applications over concerns about the borrowers’ ability to repay and not being able to show positive cash flow. This seems to be a particular problem in the tourism and hospitality sector right now. We hope government decision-makers can address those standards quickly. Many manufacturing businesses here face greatly reduced demand and cancelled orders. It is important to understand that these businesses want to keep their workforce, but right now they are struggling.

It is bad for the companies if they have to let employees go, and then try to rehire them back in the future once things return to normal. It is also bad for the workers and for the government. We very much hope that the government will support businesses to keep workers employed, either at reduced compensation, or by reduced contributions and obligations to the government.

The pre-pandemic trade war highlighted concerns on concentrating production in a single country, and now the situation has made those concerns clearer to everybody. I expect companies to continue shifting production out of China and into countries like Vietnam. The Vietnamese government’s effective response to the pandemic will further boost the country’s status as an attractive market.

There are many things the government can do right now to make Vietnam more attractive for foreign direct investment. For example, we need accelerated use of e-government, e-commerce, e-banking, fintech, modern cloud computing, and the overall reduction of paper and cash for all businesses. Accelerated implementation of these digital economy objectives will greatly reduce administrative costs and time burdens for all businesses, and will attract new investors. Another promising area is continuing infrastructure development – especially clean projects. Improving waste management and air quality concerns in Vietnam by accelerating the use of clean energy, clean vehicles, clean agriculture, and reducing the inefficiency and waste of energy will help build a stronger circular economy and will spur job creation.

Moreover, foreign investment limitations, an overly restrictive legal framework of laws governing businesses, and burdensome administrative procedures should be carefully reviewed and selectively relaxed to encourage increased foreign investment and support economic recovery. American investors remain optimistic about business prospects in Vietnam. However, we live in a competitive world. Almost every country in the region is working to grow a modern economy, which will attract future investment and high-paying jobs for their people.

By Adam Sitkoff

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