The Private Economic Development Research Board (IV Board) surveyed 1,200+ firms in early March and reports that nearly 30% of the surveyed companies estimated that their revenues had declined 20 – 50%, while 60% of companies had seen revenue declines of 50% or more.
Importantly, 74% of the surveyed companies said that if the COVID-19 epidemic lasts for six months or more, that they would be forced into bankruptcy since they won’t have enough cash-on-hand or incoming revenues to cover their ongoing expenses. Approximately three quarters of the firms that were surveyed are small companies, with each company employing less than 100 people.
According to the IV Board, which is managed by the Government’s Advisory Council for Administrative Procedure Reform, the industries that have been the hardest hit are tourism – airlines, hotels and ground transportation services – as well as education, footwear, textiles and wood production.
An estimate by the government is that the COVID-19 epidemic has slashed $7 billion off Vietnam’s tourism revenue for January and February with airlines and hotels taking major hits as both international inbound tourism and domestic tourism comes to a halt.
The ripple effect of the epidemic is now going across all of society as government authorities have issued directives to have bars, clubs, karoke rooms, movie theatres and other entertainment establishments to close.
The impact is not limited to establishments that cater to international tourists, many street eateries and restaurants that focus on Vietnamese people have become deserted or serve only a few customers, and owners are now laying off their staff in order to reduce costs.
"Without customers and students, many enterprises in the fields of tourism and education are struggling," said the report.
For the textile, footwear and wood production industries, the number one issue is the lack of raw materials from China.
According to the IV Board’s report, China is not only Vietnam’s major source of raw materials in manufacturing and processing, but also a market for 60 -70% of the country’s paper product and wood chips exports.
In this situation, there is a high possibility that these enterprises would have to suspend operations, in turn affecting millions of workers, said the board.
Besides looking for their own solutions, enterprises are seeking support from the government in forms of lower corporate tax, value added tax, waiver of fines for delayed tax payment, among others. Additionally, the government is advised to provide preferential loans for enterprises and lower interest rates and reschedule debt payment.
At a government meeting on March 3, the government said it planned to spend $1.16 billion USD to help businesses cope with the Covid-19 epidemic and help the economy achieve its 6.8% growth target in 2020. The incentives would include tax breaks, delay in tax payment, reductions of land lease fees, and an acceleration of state spending for infrastructure projects.