The risk of businesses closing down, even going bankrupt, and workers losing their jobs is looming... Forecasts show that difficulties will continue, so what can be done to help businesses survive in the coming time?

Businesses in trouble, workers lose their jobs

The decline in orders has caused many businesses to fall into a state of stagnation, which is the reality of the leather and footwear industry. "Never before have businesses in the leather and footwear industry faced such difficulties as they do now," said Mr. Pham Hong Viet, Chairman of the Hanoi Leather and Footwear Association. According to Mr. Viet, domestic and international market demand has declined sharply. The export market has shown signs of decline since July 2022, and by the first quarter of 2023, the reduction in orders has been very serious. The common reduction in orders is 50-70%; in some cases, domestic businesses have almost no export orders. Faced with this situation, since the end of last year, businesses have begun to cut working hours and production lines.

Construction enterprises are also in a not-so-optimistic situation. Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors, said that construction enterprises in the first quarter of 2023 only achieved about 8% of the annual plan; while the average of previous years was about 18-20%. This year, some enterprises said that they have not had any projects since the beginning of the year.

Not only falling into the general situation of lacking orders and narrowing production, records from many enterprises also show that, currently, enterprises are still having difficulty accessing capital for production, bank interest rates and input costs remain high. The most troublesome administrative procedures are still taxes, fees, site clearance, social insurance, fire prevention and fighting and construction. Along with that, many enterprises are concerned about the situation of handling administrative procedures in many localities, especially in the context of officials avoiding, pushing, slowing down the progress of work.

Production activities at An Mi Tools Company Limited. Photo: VIET TRUNG

According to the National Assembly's Economic Committee, many enterprises are facing great pressure to repay debts, so they have to transfer their enterprises and sell shares at very low prices, in many cases selling to foreign partners. According to the General Statistics Office, Ministry of Planning and Investment, in the past 4 months, on average, 19.7 thousand enterprises were newly established and returned to operation each month; but the number of enterprises withdrawing from the market is not less, with an average of 19.2 thousand enterprises leaving the market each month.

Worryingly, the situation of many enterprises in various industries and localities cutting orders has occurred since the fourth quarter of 2022 and continued into the first quarter of 2023, leading to hundreds of thousands of workers having their working hours reduced, losing their jobs, affecting the lives of workers. According to a quick report from localities, the number of workers on leave from enterprises nationwide in the first quarter of 2023 was nearly 294 thousand people; the whole country had nearly 149 thousand workers who lost their jobs. In particular, concentrated in the textile, footwear, component and electronic product manufacturing industries, mainly in some provinces with many industrial parks and export processing zones such as: Dong Nai, Binh Duong, Bac Ninh, Bac Giang...

In addition, information from the State Bank of Vietnam shows that as of April 25, the credit growth figure for the entire economy only reached 2.75%. This shows that the production and business situation is difficult, the capital absorption capacity of enterprises and the economy is very low. According to many experts, the nature of the credit story as well as the phenomenon of enterprises "starving for capital" at this time is not that the banking system lacks capital, but that there is capital but enterprises do not dare to borrow, cannot absorb when the interest rate is high or enterprises cannot find an outlet for their products so they do not dare to borrow for production.

Support policies need to be effectively implemented.

Enterprises recommend that the National Assembly and the Government take specific and drastic actions and promptly implement solutions to support enterprises, especially in the areas of market and capital... In particular, enterprises all want a clear legal corridor, creating favorable conditions for business operations... In particular, the Government's proposal to the National Assembly to reduce the value-added tax (VAT) rate by 2%, applicable to many groups of goods and services currently subject to a tax rate of 10%, is highly anticipated by the business community and people. The reduction of VAT will contribute to reducing production costs and lowering product prices, thereby helping enterprises increase their resilience and expand production and business.

According to Mr. Pham Hong Viet, the recent support and incentives on tax, finance, credit and the proposal to reduce VAT by 2% proposed by the Government have really created motivation for businesses. However, businesses still request ministries and branches to promptly inform about the market situation; organize trade promotion as well as support loan interest rates and debt extension to help businesses overcome this difficult period.

The business community's reflection also shows that the requirements for sustainable development, digital transformation, circular business, traceability, supply chain assessment, etc. also greatly increase costs. In order not to be eliminated from the global game, businesses need to restructure and synchronously change their production and business strategies. However, most Vietnamese businesses are small and medium-sized, and their economic potential is not strong enough, so it is difficult to quickly change their production model without preferential capital for green production. "Green manufacturing businesses currently have lower profit margins than conventional production. Businesses need to accept financial sacrifices and overcome these challenges to meet the requirements and not be eliminated from the supply chain. This shows that businesses that want to implement greening need financial resources and time, it cannot be done in 1-2 years," said Mr. Le Tien Truong, Chairman of the Board of Directors of the Vietnam Textile and Garment Group.

To remove difficulties for production, the Ministry of Industry and Trade continues to effectively implement domestic stimulus programs, support trade promotion, search and exploit new markets and new orders for enterprises. The Ministry of Industry and Trade recommends that the National Assembly and the Government direct relevant ministries and branches to immediately remove difficulties and obstacles in fire prevention and fighting regulations in accordance with the practical production activities of enterprises so that enterprises can soon complete procedures to put new projects into operation. The State only conducts post-inspection to speed up the progress of putting new investment projects into operation...

Many opinions also believe that, in the current difficult economic times, improving the business environment is a way to support without spending much money but with great efficiency. "Solutions to improve the business environment, ensuring a safe policy environment for enterprises should be considered one of the key tasks of ministries, branches and localities. It is necessary to stimulate the reform motivation of local authorities, along with a mechanism to protect those who dare to think and dare to do," said Ms. Nguyen Minh Thao, Head of the Department of Business Environment and Competitiveness Research, Central Institute for Economic Management.

At the group discussion on the socio-economic situation at the 5th Session of the 15th National Assembly, held on May 25, Minister of Planning and Investment Nguyen Chi Dung acknowledged that the biggest difficulty of the economy is the difficulty of enterprises. Accordingly, it is necessary to be more drastic in implementing solutions to support enterprises, creating a foundation to promote economic development. In particular, administrative procedure bottlenecks, if not quickly resolved, will hinder the operations of enterprises and the economy.

VU DUNG