Enterprises wait for aid packages

More than 30,000 enterprises left the market by the end of the first quarter of this year. The remaining ones are also struggling to overcome disadvantages in business. What are solutions to help them to withstand amid the context that the Covid-19 pandemic might prolong?

Mechanical manufacturing at a company in Ho Chi Minh City. (Photo: SGGP)

Mechanical manufacturing at a company in Ho Chi Minh City. (Photo: SGGP)

Mr. To Hoai Nam, Vice Chairman of the Vietnam Association of Small and Medium Enterprises, said that domestic enterprises have never encountered such difficult situations as currently. From January to February, enterprises faced difficulties due to the risk of raw material supply disruption. Many enterprises had to link to seek and share the sources of raw materials from other markets at higher prices. By the first half of March, when the sources of raw materials are basically enough to maintain the production of some industries, some countries temporarily halted the import of Vietnamese goods.

Statistics in the first quarter of this year, the export turnover was estimated at US$59.08 billion, up 0.5 percent compared to the same period last year. There were eight products with export turnover above $1 billion, accounting for 70.6 percent of the total exports. Cell phones and components hit $12.4 billion; computers and components $8.2 billion; garment and textile $6.6 billion; equipment, machinery, and spare parts $4.7 billion. The export turnovers of footwear, wooden products, seafood, and aquatic products were from $1.6 billion to $4.7 billion.

However, many enterprises concerned that export turnover will possibly decline in the second quarter of this year. According to Mr. Pham Xuan Hong, Chairman of the Ho Chi Minh City Textile and Garment - Embroidery Association, not only did import partners order to suspend production of new orders or export of finished orders but many countries, especially European countries, have closed the border gates to prevent the spread of the disease. A shortage of raw materials continues to happen when many countries have temporarily paused production and restricted people from going out, including India. A few countries that are still maintaining production have increased sharply the prices of raw materials so many Vietnamese enterprises cannot afford. Currently, several firms have temporarily halted production or operated perfunctorily to keep their workers but they will not be able to withstand until the end of June.

In the domestic market, even enterprises in the processing and manufacturing sector that had received a sudden increase in the number of orders in the past months also showed cautiousness when evaluating the outlook of the market in the months to come. The largest motorbike manufacturer in Vietnam, Honda, announced that it would temporarily halt its production at its three factories in Vietnam from April 1 to 15 for the prevention of the Covid-19 pandemic. Earlier, Japanese automobile maker, Toyota, also suspended operations of its factory in Vinh Phuc Province for the same reason that has somewhat made many enterprises worry. Currently, 38.8 percent of enterprises said that business outlook will be better; 25.9 percent of enterprises expected worse situation; 35.3 percent of enterprises said that the situation will be stable.

Economic experts said that capital exhaustion and production depletion also put Vietnamese enterprises at the risk of being acquired by foreign enterprises, especially enterprises with long-standing brand names, good reputations, and stable market share. Since the beginning of this year, there were 2,523 turns of capital contribution for share purchasing of foreign investors with a total value of nearly $2 billion.
Mr. Tran Hoai Nam, CEO of Sunlight Mechanical Company, said that to protect domestic enterprises from the risks of closing or having to sell themselves during this time, the Government’s relief packages were launched timely, especially the credit aid package and tax and fee exemption of up to VND280 trillion. However, tardiness in guiding the implementation for subordinate agencies has made the implementation of these relief packages stagnant so enterprises have not accessed these aid packages yet.

The representative of Dien Quang Joint Stock Company also said that besides support measures from banks, up to now, the company has not received any guidance about the exemption and extension of taxes and fees from competent authorities.

Support policies, including reducing lending interest rates, speeding up the loan disbursement process, and adding working capital for enterprises need to be implemented soon. The internal strength of Vietnamese enterprises is weak, now becomes weaker when the pandemic prolongs. Once the backup resources run out, it will be difficult for enterprises to recover in the short term even if the support packages reach them.
According to many enterprises, more importantly, authorities must have a post-inspection policy to ensure that relief packages reach the right people. Ms. Ly Kim Chi, Chairwoman of the Food and Foodstuffs Association of Ho Chi Minh City, emphasized that implementing quickly the support packages will help enterprises to add their capital to increase their capacity in stockpiling raw materials and finished products, contributing to production stabilization in the long term, at least until the end of this year.

By Ai Van – Translated by Thuy Doan

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