Solutions to save businesses

To save businesses in this particularly difficult context, experts say many urgent, even unprecedented, solutions are needed.

"No way out" is the word Mr. Hai, director of a transport company with a large market share in the southern provinces, used to describe the situation of his company in particular and the transport industry in general. His company is on the brink of bankruptcy due to a sharp decrease in orders, debt to banks and partners. Previously, his company had 70 tractors, but now it has sold half to have cash flow. "We are selling more but there are almost no buyers because there are too many businesses in the same industry selling," he added.

This is just one of thousands of units that have had to choose to reduce production and cut staff to survive the first months of the year. Some others have even had to sell themselves to avoid bankruptcy.

Figures released by the General Statistics Office on May 29 showed that more than 88,000 businesses left the market. A survey by VnExpress and the Private Economic Development Research Board (Board IV) of 9,556 businesses also showed a particularly difficult picture, with 82% planning to reduce scale, suspend or cease operations in the remaining months of 2023. Of the businesses still operating, 71% plan to reduce the size of their workforce, of which over 22% plan to reduce more than half of their staff; 80.3% of businesses plan to reduce revenue, of which 29.5% will decrease by over 50%.

More than 80% of businesses have negative or very negative assessments of Vietnam's economic prospects in the remaining months.

The difficulties of the business community come from external and internal pressures. Externally, due to the global economic recession, inflation has increased, leading to a decrease in demand for orders. Domestically, internal problems such as capital flow blockages, unfavorable business conditions, and concerns about the risk of criminalization have caused businesses that have not yet recovered from the pandemic to be hit with another punch.

Therefore, rescue proposals for businesses also focus on these groups of problems, especially those originating from within.

The first is to clear the flow of capital for businesses. "Capital is the blood of a business. Once the body is sick and does not have enough blood, it will get sicker," said Mr. Trinh Xuan An, a delegate from Dong Nai province. Although the interest rate has decreased, businesses still have to borrow at a rate of over 10%, not to mention other costs, making it difficult for businesses to survive.

"Many times the Prime Minister has asked the State Bank to reduce interest rates, but in reality, it has not responded," said Mr. An. According to him, more drastic actions are needed for the capital market, for example, an unprecedented policy such as requiring lending rates to fall below 9%; at the same time, changing lending conditions to be more "breathable".

"We can also use the business support fund to inject capital, especially for the production group," he added.

Dr. Nguyen Tu Anh, Director of the General Department (Central Economic Committee), also agreed that reducing interest rates should be a priority at this time. Because only when interest rates decrease, businesses will reduce the pressure on capital costs, thereby having more opportunities to overcome difficulties. According to his calculations, with an average interest rate of 10% per year, the interest cost that Vietnamese businesses and people have to bear is more than 1.13 million billion VND, equivalent to 12% of GDP. Therefore, if lending interest rates decrease by 1 percentage point, the economy will be supported with more than 113,000 billion VND, larger than current economic recovery support packages.

Sharing more, Mr. Nguyen Manh Hung, Standing Member of the National Assembly's Economic Committee, said that this agency had proposed that the State Bank consider removing the credit room. "The Economic Committee's viewpoint is to consider removing it because the credit room creates a mechanism of asking for and giving, depending on the credit ceiling, which hinders businesses from proactively accessing capital," he said. The State Bank is holding the view that it may not necessarily keep the credit room but has not yet specifically confirmed the roadmap for removal.

In the petition sent to the Prime Minister by Committee IV, businesses also proposed that the Government study a preferential credit package for key industries and sectors, including items for small and medium-sized enterprises. They also asked the Government to allow domestic commercial banks to buy back bonds that are about to mature and treat them as a special form of credit. The value of these bonds currently exceeds the purchasing capacity of domestic enterprises many times.

The first floor of the Discovery Complex building had only a few lighted stalls and no customers in March 2023. Photo: Ngoc Thanh — The first floor of the Discovery Complex building had only a few lighted stalls and no customers in March 2023. Photo: *Ngoc Thanh*

The second solution is to focus on reducing fees and costs for businesses. For example, continue the 2% VAT reduction policy similar to the 2022 period but extend it, possibly even until the end of 2025, instead of applying it in the last 6 months of 2023.

According to Ms. Ly Kim Chi, Chairwoman of the Ho Chi Minh City Food and Foodstuff Association, extending the application period will help increase the spread of the policy. Meanwhile, Mr. Tran Van Lam, Standing Member of the National Assembly's Finance and Budget Committee, assessed that reducing VAT for 6 months would hardly bring about the expected recovery.

Many businesses also believe that the Government can consider continuing to extend, postpone, and reduce fees related to social insurance, trade union fees, and consider new personal income tax rates to help reduce labor costs; while also speeding up tax refunds for businesses. Previously, a series of companies in the rubber, plastic, wood, and cassava industries reported that tens and hundreds of billions of VND were stuck due to not having received VAT refunds, adding to the burden on capital flows for businesses.

According to Committee IV, the Government may also consider some special mechanisms such as allowing businesses to get tax refunds within 3 months after completing the export order. Post-audits will be conducted to control risks and prevent tax fraud.

Third is to continue improving the investment and business environment, which is currently stagnant. "The story of creating services for businesses and people in the previous term has not been focused on mainly because of the concern of preventing and recovering from the pandemic," Mr. Nguyen Manh Hung assessed. Currently, administrative procedures are a major barrier affecting business operations.

He acknowledged that the National Assembly needs to immediately remove legal obstacles for businesses during this time, especially in the real estate, transportation, and public investment sectors.

Previously, many experts have assessed that removing legal obstacles is a zero-cost solution to help break the ice of real estate, helping to cure the disease of capital overruns and capital shortages in this market. If successful, removing difficulties for real estate will reopen the economic flow because this is an industry with great influence.

Mr. Dau Anh Tuan, Deputy General Secretary of the Vietnam Federation of Commerce and Industry (VCCI), also noted that inspections of businesses and business establishments should be limited, while unnecessary procedures should be cut. This will help businesses save time and unnecessary expenses.

Meanwhile, many businesses also suggested that the authorities should quickly complete the investigation of current cases so that businesses can feel secure in production. The government can also consider a resolution to not criminalize economic and civil relations as in the years 1997-2000.

In addition, some opinions also mentioned the development of the domestic market to supplement the declining international demand. According to Mr. Tran Hoang Ngan, a National Assembly delegate, to do this, it is necessary to invest more strongly in the research and development department in enterprises as well as have incentive policies on taxes, fees, and support packages for people. Regarding the international market, many recommendations say that the Government needs to continue trade negotiations to develop and diversify output and input markets to reduce dependence on traditional markets.

The Government has identified and is studying specific solutions to this group of problems. In a telegram issued on May 26, Prime Minister Pham Minh Chinh requested to continue to find ways to reduce interest rates; promptly refund VAT to businesses; implement tax exemptions and reductions as well as propose other policies if there is room; at the same time, he requested units to cut down on administrative procedures and handle officials who are afraid of responsibility and do not dare to perform their duties.

Anh Minh - Phuong Anh - Thi Ha

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