Pandemic second wave makes it difficult for enterprises

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Enterprises have to overcome many difficulties in the pandemic.

More than 80% have no orders

This is the result from the third survey of the Private Economic Development Research Board (Board IV) in August 2020.

In particular, for difficulties that enterprises face in the next six months, according to the surveyed enterprises, 81% said they had no customers, orders or contracts to consume products and services;72% said that they had to pay salaries, social insurance, health insurance, unemployment insurance and trade union fees; 53% said that they had to pay for bank loans,42-45% said that they paid for electricity, water, fuel inputs, rent for warehouses, factories, office equipment.

Covid-19 damagesindustries widely, breakssupply chains, makescrisis, causing enterprises to be unable to pay and putting pressure on them because they still have to ensure their expensesfor raw materials and laborimmediately.

According to the survey, in the first wave of the pandemic, the biggest difficulty of enterpriseswas supply chain breakdown, now the problem is cash flow, reduced revenue of enterprises, with some even having no revenue and no liquidity.

This affects the cash flow of enterprises when 76% of the respondents said that their revenues and expenditures were not balanced, of which 54% said that their cash inflowsmet less than 50% of costs, so they must cut staff.

Therefore, the wave of labor cuts has occurred on a large scale, in the first wave, most enterprises tried not to lay off workers. The impact of the second wavecaused more than 47% of enterprises to cut jobs.

In which, 5% of enterprises have cut 100% of the labor force; 15% of enterprises have cut from 75% to less than 100% of the labor force; 13% of enterprises have cut from 50% to less than 75% of the labor force; 10% of enterprises have cut from 25% to less than 50% of the labor force; 4% of enterprises cut less than 25% of the labor force and 27% of enterprises did not cut labor but reduced working hours or reduced wages.

Many recommendations to support enterprises

While the survey showed that there was a decrease in trust when being consulted about the effectiveness of the issued policies, it is recognized that the issued policy lacked the ability to be implemented, leading to poor performance. Therefore, the Board IV suggested that, in the future, policies must put the goal of supporting enterprisesas thetop priority, policies must be promulgatedquickly,put into practice quicklyand they should be in line with reality.

In addition, instead of supporting enterprises that are exhausted or broken, they should aim for policies to help enterprises reduce their cash flow for balance and use a very lowcapital flow for minimal expenses to maintain labor, production and business.

The Private Economic Development Research Board proposes the Government to reduce corporate income tax by 30% for all enterprises in 2020 instead of only applying to enterprises with total revenue of not more than VND200 billion this year.

In fact, every enterprise is negatively affected by Covid-19 regardless of the size of its revenue. Small and micro enterprises may shut down immediately due to the pandemic, but large firms in their efforts to maintain the system will suffer even more severe damage, negatively impacting the economyunless there are effective support policies.

In addition, the Government considers and submits to the National Assembly to reduce at least 50% of social insurance, health insurance and unemployment insurance in 2020, even extending to 2021. At the same time, postpone the payment time under the current regulations, because this is a huge cash flow in the expenditure structure of enterprises.

Exemption of trade union fees in 2020 and 2021 instead of just delaying payment for a few months in order to strengthen the spirit of enterprises. If this policy is issued, it will be a great support measure for enterprises to maintain capital flows, reducing time with administrative procedures.

Board IV also proposes the Government to submit to the National Assembly a 50% reduction in value added tax, cost reduction for consumers in order to stimulate consumption demand after the pandemic. Because, now enterprises really need working capital to maintain production, business and labor.

Adding 10% VAT and waitingto be refunded by the end of the year make it difficult for them, and it is also difficult to implement consumer demand stimulus policies with the products and services they provide.

For banks, enterprises propose to expand forms of unsecured loans; interest rate incentives for investment loans, reducing current loan interest rates; delay repayment time.

Regarding electricity price support, tourism and logistics businesses have asked the Government to extend the time to apply electricity prices to this sector instead of only applying five months of support policies earlier this year. According to calculations, electricity bills account for a high proportion in the cost of hotels and restaurants, although they are almost inactive, but they still have to maintain a minimum level of facilities. For cold storage units, seafood,fruit and vegetable import-export chains, electricity bills currently account for about 30% of input costs, pushing logistics costs up.

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Enterprises also propose to the Government not to increase the regional minimum wage at least by the end of 2021 to reduce pressure on paying salaries,insurance premiums and others based on salary. Ministries and branches do not increase service fees and charges as prescribed by the State;limit maximuminspection and examination.