Tuesday,  Nov 24, 2020,05:49 (GMT+7) 0 0
Economic health at stake
By Son Nguyen
Thursday,  Mar 5, 2020,21:26 (GMT+7)

Economic health at stake

By Son Nguyen

Outcries from enterprises across the board are striking all ears far and wide as Covid-19, a highly-contagious disease caused by the new coronavirus originating in China, has been ruining businesses. Many find themselves in the hot water since their financial obligations that are otherwise normal business have become unbearable burdens as revenue streams are stonewalled. Visions for the business circle are darkened, with many feared to be moving to the brink of bankruptcy in no time if the right cures are not prescribed soon.

Such voices have been heard by the Government, policymakers and business advocators, who are joining forces to save the economy from an imminent illness. However, the right cures are not there to take for all the critical ailments.

Tourism and aviation, needless to say, are among sectors taking the hardest hit from Covid-19 as local and international travel has tumbled – if not coming to a dead halt in numerous cases – but various other sectors including trade, manufacturing and retail have also suffered significantly. Business representatives across the countries have sat back to hash out remedial solutions for submission to authorities for consideration.

Chu Tien Dung, president of the HCMC Union of Business Associations, noted at a meeting with entrepreneurs on Saturday that Covid-19 has not only paralyzed China as Vietnam’s biggest trade partner, but also wreaked havoc on other major economies like Japan and South Korea that are also key importers of Vietnamese commodities, according to the Vietnam News Agency. “If the situation continues without solutions, the hardship faced by Vietnamese enterprises will be insurmountable, with less-resilient, smaller enterprises to shut down business, he remarked.

Vu Tien Loc, president of the Vietnam Chamber of Commerce and Industry (VCCI), pointedly mentions on the news site Bnews.vn the many problems facing enterprises and proposes the Government to take urgent solutions. The mounting backlog of commodities, especially farm produce bound for the Chinese market, the severe shortage of materials and accessories for domestic production, and the massive layoffs of workers due to market upheavals directly incited by Covid-19 are crippling enterprises, Loc observes on the news site.

Therefore, central and local authorities “should quickly simplify administrative procedures related to investment and business in all sectors to expedite the disbursement of capital alongside mobilization of private investment,” Loc is quoted in the news site as saying.

According to Dau Anh Tuan, head of VCCI’s Legislative Department, many enterprises have now foreseen disruption of their production in the next few weeks due to the lack of materials, and as such, they will fail to maintain their links in the global supply chains that they have painstakingly built up over the years, says the news site Bnews.vn.

Financial burdens shouldered by enterprises should also be relieved to some extent so that they can survive tough times, according to the VCCI leader.

“Certain taxes and fees payable by enterprises should be reduced, exempted and rescheduled in areas most susceptible to the epidemic,” Loc suggests, adding “the Government and the State Bank of Vietnam (SBV) should cut interest rates, freeze debts and extend credits” for enterprises.

Commenting on financial challenges for enterprises, head of the SBV’s Credits Department Nguyen Quoc Hung says on Dan Tri that the epidemic will most likely spike the amount of bad debt at banks if solutions are not promptly taken. Citing reports from 23 commercial banks, Hung says that up to VND926 trillion, or some US$40 billion, of outstanding loans are affected by the epidemic, accounting for 14.27% of the total amount of outstanding loans at these lenders.

From a macroeconomic perspective, Can Van Luc, an economist with the Bank for Investment and Development of Vietnam, says in Nguoi Lao Dong that when it comes to rescue solutions for enterprises, fiscal policies should prevail for quick execution. Specifically, “the Government should resort to taxation and public investment vehicles to spur demand.”

Tran Du Lich, an economic advisor to the Prime Minister, agrees the taxation solution, saying in Tuoi Tre that the most feasible policy should be a fiscal one to offer tax breaks or reduction to help enterprises survive the hardship. In addition, public investment projects should be expedited to disburse more funds into the economy, the economist suggests.

Ngo Tri Long, a market researcher, notes in the paper that apart from tax incentives, banks should also roll up their sleeves to come to their clients’ rescue.

In fact, many banks have actively responded to the call.

Asia Commercial Bank, for example, has announced a credit line of VND25 trillion with soft rates for borrowers, while SHB has earmarked VND3 trillion of soft loans for enterprises, with an annual rate some 1.5 percentage points lower than before, according to Tuoi Tre. Sacombank has also announced a credit package of VND10 trillion for the purpose.

However, several banks say they are awaiting specific guidelines from the central bank before loosening their purse strings.

Eximbank, for example, is preparing criteria and procedures to cut lending rates and reschedule debt payments for those clients affected by Covid-19. Upon guidelines by the central bank, Eximbank will cut the lending rate by between 0.5 and 1 percentage point for clients, acting general director of the bank Nguyen Canh Vinh says in Nguoi Lao Dong.

Dao Minh Tu, deputy governor of the central bank, says the banking watchdog will soon issue a circular guiding commercial banks how to restructure debts, reschedule debt payments and reduce lending rates for clients hit hard by the epidemic. Tu also noted that over the past few weeks, banks have supported 44,000 clients with total outstanding debts of some VND222 trillion, Nguoi Lao Dong reports.

The Government has also taken heed.

At a Cabinet meeting this Tuesday, Prime Minister Nguyen Xuan Phuc cannoned attention to a draft directive on measures to maintain business and ensure social security in the face of the fast-spreading epidemic, according to Thanh Nien. The directive, to be issued by the Prime Minister soon, includes six groups of solutions, focusing on measures to cut costs for enterprises, bolster trade, recover tourism, spur investment, and speed up public investment disbursement.

The Government leader, however, emphasized that the support is not meant a subsidy for weaknesses, and there will be no stimulus package now. The support must have immediate effect to help businesses and the people adversely impacted by Covid-19, says the leader.

Still, it is unknown when new support policies from the Government and relevant agencies are available and whether such policies can be enforced in a fast way to help save ailing enterprises.

In an editorial, Lao Dong says many enterprises have moved to the brink of collapse, putting the economy at stake, so “it is time they need support from the Government, in the form of adjustments in tax and fee policies.” The State budget may shrink due to such policies, but the survival of enterprises will guarantee the foundation of the economy and the livelihood of the people, says the paper.

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