Over the past few months, Red Lotus Trade Co. Ltd., in Hung Yen province has had lay off a large percentage of its 180 employees at its three workshops producing cotton buds. This is because demands for the products have gone down and the business’ input material supplies have also shrunk.

“Our company has suffered a reduction of 80% on-year since May when the impact of the fourth COVID-19 wave became more serious,” said Tran Hai Van, vice director of Red Lotus.

Prior to the appearance of COVID-19, the company’s annual revenue and profit often increased 15-20% on average year on year.

“However, we cannot now dream about such an impressive rise. Instead, we have had to lay off more than half of our employees,” Van said.

In fact, Red Lotus’s predicament is now a common one in Vietnam, especially in big industrial hubs in the northern and southern regions of Vietnam, which account for 70% of Vietnam’s industrial growth and where hundreds of thousands of businesses, both locally and foreign-invested, have been hard-hit by COVID-19.

Though officia statistics of enterprises facing the serious aftermath of the pandemic in the first eight months of this year will be published by the General Statistics Office (GSO) over the next few days, current projections reveal that the number of such firms will be huge due to the prolonged restrictions in many localities nationwide.

The GSO reports that in the first seven months of 2021, COVID-19 forced about 79,700 firms to cease operations and complete procedures for dissolution, a year-on-year 25.5% rise. This means that close to 11,400 enterprises left the market on average on a monthly basis.

What is more, Vietnam’s index for industrial production (IIP) in July expanded 1.8% month-on-month and 2.2% year-on-year –also the lowest year-on-year increase over the past seven months. The seven-month IIP increased 7.9% year-on-year, much higher than that of only 2.6% year-on-year in the same period last year, but lower than that of 9.4% in the first seven months of 2019.

In the first seven months of this year, manufacturing and processing rose 9.9% as compared to the corresponding period last year; while electricity production and distribution went up by 8.2%, and mineral exploitation decreased 6.3% year-on-year, resulting in a 1% decrease in industrial production.

Fresh actions

The government on August 20 promulgated Resolution No.94/NQ-CP, approving amendments of up to 10 laws to create more favourable conditions for business and investment activities.

The 10 laws comprise the laws on customs, special consumption taxes, enterprises, investment, public investment, and public-private partnerships, among others.

The government ordered ministries, central agencies, and centrally-ruled cities and provinces to expedite the amendments of all regulations which are overlapping, infeasible, and impractical, obstructing the investment and business activities of individuals and enterprises.

The Ministry of Justice has received revisions from the ministries, agencies, and localities, and is now sending them to the government for discussion in late August or early September at the latest.

In another move, On August 16, 2021, Minister of Planning and Investment Nguyen Chi Dung officially submitted to the government a draft resolution on supporting businesses in the context of the COVID-19 pandemic. Minister Dung said that the resolution has been formulated from the viewpoint of “harmonious benefits and shared risks” and on the motto of “soonest, most effective”. The proposed policy is aimed at minimising bottlenecks in production and business, and minimising damage from the negative impact of the pandemic on enterprises.

“Businesses are playing a very important role in the country’s socioeconomic development. Over the years, they have actively contributed to economic growth, export turnover, and the state budget. They have also created jobs, and incomes for workers, while contributing to poverty reduction,” said Minister Dung. “They have also contributed to ensuring social stability, and served as an important link in the production network and value chains, as well as being also a key creator of social material wealth.”

The draft resolution aims to help about one million businesses and customers to benefit from new credit policies; about 160,000 enterprises enjoy the tax payment extension policy; exemption or reduction of taxes, fees and land rents; and about 50,000 businesses will be able to resume operations.

There are four groups of tasks to be implemented under the draft resolution.

In the first group, the Ministry of Planning and Investment (MPI) proposes the government assign the Ministry of Health to review and amend regulations on health insurance in the direction of allowing health insurance to pay for telemedicine activities with fees. At the same time, it is necessary to issue instructions for enterprises to purchase instruments, conduct self-testing and recognise the test results of enterprises.

The second group includes tasks and solutions to ensure the smooth and efficient circulation of goods, and overcome disruptions in supply chains and value chains. According to the MPI, a lack of specific guidelines and inconsistent implementation among localities have caused traffic congestion at some seaports, roads, and waterways, badly affecting the production and business activities of enterprises.

With the third group of solutions, there are measures to help cut costs and remove cash flow difficulties for businesses and production. The MPI proposes that the government assign the Ministry of Labour, Invalids, and Social Affairs (MoLISA) to guide Vietnam Social Security to study the policy of suspending and reducing the payment of social insurance premiums in 2021 for businesses until June 2022; assigning the Ministry of Transport to coordinate with the State Bank of Vietnam (SBV) to develop a plan to support air transport enterprises and report to the Prime Minister in September 2021.

The Ministry of Industry and Trade has been asked to report to the prime minister soon on a plan to reduce electricity prices for warehouses of logistics enterprises, agro-forestry-fishery processing enterprises and a number of commodity sectors with export turnover in 2020 of over US$1 billion.

For the fourth groups of solutions, the MPI submitted a proposal to the prime minister to assign the MoLISA to develop policies to flexibly apply and relax regulations and conditions on the granting and extension of work permits for professionals and foreign nationals working in Vietnam, suitable to the new context.

It is also necessary to study and propose to allow employers to negotiate with employees to increase overtime hours per month, provided the total the number of overtime hours does not exceed 300 hours a year.

Kiss of life

In addition, one of the most important solutions to support enterprises and people is the National Assembly Standing Committee will soon promulgate a draft resolution on tax exemption and reduction to support individuals and businesses badly affected by COVID-19.

The Ministry of Finance (MoF), meanwhile, is now working on a draft of the government’s decree guiding the implementation of the resolution after it is adopted.

Under the draft resolution, four policies have been proposed, including three groups of policies seen for the first time since the pandemic appeared in Vietnam.

Specifically, in the first policy, the government will apply a 30% reduction in corporate income tax (CIT) in 2021 for businesses, cooperatives, non-business units, and other organisations as applied in 2020.

Meanwhile, under the three upcoming new policies, there will be a 50% reduction of personal income tax (PIT), VAT, and other taxes arising from business activities in the third and fourth quarters of 2021 for households and individuals doing business in all sectors, geographical locations, with different forms and methods of tax declaration and payment.

There will also be a reduction of 30% for VAT for business activities in sectors seriously affected by COVID-19 such as tourism, transportation, hospitality, catering, sports, entertainment, art, press, television, library, archives, museum, and other cultural activities.

What is more, there will also be exemption for the late payment of interest arising in 2020 and 2021 (the two years affected by COVID-19) for businesses and organisations (including their dependents and business locations) incurring continuous losses in 2018, 2019 and 2020.

SBV Deputy Governor Dao Minh Tu also said that the banking sector has and will also support enterprises and people.

“The SBV has continued directing commercial banks to cut down their operating costs to a minimum, in order to facilitate the reduction of interest rates; and to use a share of their profits to reduce interest rates for businesses,” Tu said. “Implementing these directions, the Vietnam Banks’ Association (consisted of 16 largest commercial banks) has come to an agreement and expressed commitments to continue reducing interest rates for different groups under the spirit of ‘the more difficulties you face, the more reductions we carry out’.”

Commercial banks will further reduce interest rates until the end of this year, with the total value of the reductions estimated at nearly VND20.5 trillion (US$899 million), Tu stressed.

On April 19, the government signed and issued Decree No.52/2021/ND-CP on the extension of time limits for the payment of VAT, CIT, PIT and land rental fees in 2021. This decree took effect on its signing date. The total size of the package was estimated at VND115 trillion (US$5 billion).

Decree 52 extends the time limits for payment of the payable VAT amount of the tax periods of March, April, May, June, July and August 2021 (in case of making monthly VAT declaration), and the tax periods of first and second quarters of 2021 (in case of making quarterly VAT declaration) of enterprises and organisations. The extension duration is five months for the VAT amount of the tax periods of March, April, May and June 2021, and the tax periods of first and second quarters of 2021; four months for the VAT amount of the tax period of July 2021; and three months for the VAT amount of the tax period of August 2021.

As for firms like Red Lotus Trade Co. Ltd, vice director Tran Hai Van hopes that the new policies from the MPI, the MoF, and the National Assembly Standing Committee will soon materialise.

“If they materialise, we will be able to save some money and recover production” Van said. “Nevertheless, we are afraid that there will be hurdles for enterprises to benefit from the new policies.”

For example, since April 2020 the government has been applying a VND62 trillion (US$2.69 billion) package to assist unemployed people and businesses directly hurt by the pandemic, but those like his company have been unable to benefit from it.

As of May 2021, only VND13.1 trillion (US$569.5 million) of this package was disbursed, due to many complex procedures, according to the MoLISA.