Many researchers think that the world will be re-shaped following Covid-19 with many changes in all areas. This transformation will open up big opportunities for countries which have appropriate strategies and policies to respond successfully to the new context. According to the author, Vietnam has many advantages, and the country will really change herself if she can leverage her advantages and take appropriate measures to minimize disadvantages.
The first advantage is the Vietnamese Government and people are acting vigorously and controlling well the Covid-19 pandemic, earning a good reputation in the international community. The Government is humble and ready to cooperate with other countries and the international community. Alongside the pandemic control, Vietnam also offers practical and timely assistance with face mask and protective clothing donations to a number of countries. The appreciation for the quality of these items shows that Vietnam has better medical capacity and production and coping ability than many countries worldwide.
Another advantage of Vietnam is a strong agriculture which can help ensure national food security and contribute a great part to the global food security. The initiative in food security enables Vietnam to implement support policies and minimize impacts on other economic sectors.
Vietnam is still in the age of golden population and has relatively high-quality manpower. The Vietnamese people have a high sense of economy due to the constant confrontation to shocks, and so they have good capacity to cope with risks.
Vietnam has an economy with large openness, so it can be greatly impacted by the pandemic. However, imports-exports are mostly from the foreign direct investment (FDI) sector, accounting for about 70% of the country’s total import-export value. The electronics industry accounts for the largest share of this value but is little impacted by the pandemic. Therefore, the impact of the pandemic and the economic effect of export decline may not be too big.
The social distancing policy which has diminished supply and demand has a big impact on businesses in the services sector, especially tourism, education, aviation, passenger transport and non-essential goods trade. However, the sector may be able to recover quickly after the pandemic ends, especially with small household businesses and services.
To turn the above advantages into opportunities for the economy to rebound and “take off” after the pandemic, the Government should have appropriate policies over the short- and medium terms.
The Government should have support policies with clear, transparent criteria to reach the right beneficiaries. The policies should be carried out quickly with the post-inspection orientation, with heavy penalties for frauds and corruptions.
The support package for people should be carried out immediately this month (April). For businesses, it needs practical supports to reduce fees and charges, especially for those in the logistics sector.
For an economy with a large foreign trade like Vietnam, all the advantages will go away if the logistics system is disrupted after the pandemic. The Government should scrap all fuel taxes and fees, which are among the big costs for the transport sector, and other charges to reduce the fees for road transport and directly support the aviation sector. Customs clearance should be expedited, and cargo handling capacity should be increased by improving the capacity of seaports, airports and main border gates. In addition, the Government should support leading businesses and FDI enterprises in important sectors, such as aviation, transport, construction and distribution.
Based on different scenarios for the impacts of the pandemic on the global economy, the International Labor Organization (ILO) estimated that some 25 million people in the world will be jobless. The Vietnamese Government should create jobs for unemployed people by speeding up disbursement of funds for key projects. This solution can increase job opportunities and ease difficulties for the construction sector as well as indirectly promote the development of relevant services. Specifically, the Government can increase investment in transport projects; develop routes linking big cities, heavily populated areas and regions; and prioritize salinity intrusion projects in the Mekong Delta to ensure food security.
Covid-19 shows that an economy heavily reliant on the value chain in other countries will be highly vulnerable once there is disruption in the supply chain. Big countries and multinationals have realized clearly that dependence on China is a big risk, and they are taking steps to relocate most production systems home or to other countries to diversify supply sources and avoid risks. This is a big opportunity for Vietnam.
The Government should establish committees to attract investments from big groups worldwide. Previous experiences in FDI attraction should be applied, such as incentives in tax and land rent, commitments to intellectual property protection, supports for local human resources training, and promises to use investors’ products, for example renewable energy (solar and wind power), in local projects. Vietnam may not earn large tax revenue from those groups, but the country can gain many indirect economic benefits from labor, suppliers in the production chain, and related services like logistics, catering and lodging. An example is Samsung. The group’s investment projects have a tremendous effect on Vietnam’s economy.
Tourism should also be taken into account in medium-term policies after Covid-19 is over. The Government should support an alliance between aviation firms and travel companies, hotels, restaurants and resorts to offer low-cost tour packages, like what Thailand offered in 1997, in preparation for local and international tourist attraction after the pandemic.
By Phung Duc Tung (*)
(*) Director of the Mekong Development Research Institute (MDRI)