Businesses need contingency plan to overcome Covid-19

SGI

The Covid-19 pandemic is putting an enormous amount of pressure on businesses. Most businesses in key areas of agriculture and fisheries in the highly productive rich terrain of the Mekong Delta in the southern part of Vietnam requires planning for current and post-pandemic scenarios.

Businesses need contingency plan to overcome Covid-19

After neighboring Dong Thap Province in the south of Vietnam banned foreigner travelers, Tien Giang Province too followed suit, and all tourism in the area is now temporarily on hold. Many businesses have been hit with no more revenue, the supply chain for raw materials has been disrupted, and most production and business activities have slowed considerably.

The Prime Minister has just issued Directive No. 11/CT-TTg to take care of urgent tasks and solutions to help in removing difficulties for production and businesses, and ensure some business security in this time of the Covid-19 outbreak. Accordingly, a credit package of VND 250,000 bn, and a fiscal package of VND 30,000 bn and a series of other measures will be implemented to support businesses.

The Government has committed to a comprehensive program to support businesses, reduce costs, exempt or reduce taxes, fees, loan interest rates, extend or postpone debts, delay payments, including taxes and insurance fees, especially in sectors heavily affected by the Covid-19 epidemic. However, the real effectiveness of the new policy depends on the length of the policy, the capacity to absorb capital and the ability to remove bottlenecks in administrative procedures.

Although there are a number of large-scale enterprises in the fisheries and food industries, the majority of Mekong Delta enterprises are small and medium-sized. According to the Vietnam White Paper in 2019, the whole Mekong Delta has more than 53,000 enterprises, accounting for 7.4% of the total number of enterprises nationwide, much lower than the Southeast region with 295,000 enterprises, the Red River Delta with more than 222,000, and North Central and the Central Coast with nearly 96,000 enterprises.

Businesses in the Mekong Delta are closely linked to agriculture and fisheries, from input material to output, and depends on sales to major markets such as China, South Korea, Japan, the EU, and the US. These markets are badly affected by the Covid-19 pandemic. The revenue from all businesses has plummeted, especially in the tourism industry which includes restaurants, hotels, and event management organizations, besides the agricultural sector and the processing industry. This difficulty has led to an increase in bank debts. Bank debts are due, while revenue has declined and businesses cannot export goods due to lockdown of borders in most of the countries.

Enterprises are running sick and looking for a healing remedy hence a support policy will provide the best medicine for businesses at this time. In order to recover,  enterprises must make every effort and follow a methodical strategy to meet the conditions of exemption, reduction, tax extension and interest rate reduction. From a macro perspective, the current stress of the Covid-19 pandemic situation calls for great  economic sacrifices, but if businesses cannot adapt, do not consider following business plans, they will not be able to recover when the pandemic is finally over.

The Prime Minister has asked the State Bank of Vietnam to take an initiative in finding solutions to support businesses with more capital to overcome present difficulties, but the important thing is that businesses must be able to absorb this support policy. Enterprises must actively prepare contingency plans to immediately implement production and business plans, with internal resources to absorb capital. Otherwise this credit package will not reach the intended markets.

Another problem is that businesses have to look back at the domestic market. Right now, the psychology of hoarding has sprung up among the people and has a certain impact on market prices. Production is stalled because of the Covid-19 pandemic and without preparation the impact has been even greater. Especially in the Mekong Delta area, a key production region for food and fruits for the whole country. Although the market is difficult, it must be prepared so that when it reopens again, it can meet the huge demand in the market.

No one is expecting the Covid-19 pandemic to last forever, but until it does, businesses have to attempt to turn challenges into business opportunities. Businesses are suffering as of now, and will take time to recover, but they must also prepare an effective recovery roadmap and seize opportunities along the way. These opportunities will be more in effect as post-pandemic market demand reopens again. The management agencies must provide complete information for businesses to identify the right needs during each phase, until this present crisis is over.

Translated by Francis

Dr. Tran Huu Hiep

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