COVID-19 pandemic has caused many difficulties and damages to economies around the world, but it is an opportunity for economies and businesses if they know how to take advantage of the corrections and restructuring of the economic situation, global trade caused by the pandemic. Therefore, timely-in advanced preparation of scripts and solutions anticipation that helps businesses to recover strongly after pandemic is indispensable.
Governments and economies are adjusting macro policies in the near future. Following up and updating these macro-economic changes helps CEOs to grasp market trends, seek business investment opportunities, avoid risks … not only overcome difficulties, and revive businesses, but also can break through and transform themselves.
VIVA will regularly monitor and update to you about relevant-macro information every week, enclosed with professional comments and perspectives.
At the same time, VIVA maintains advisory groups who are well-trained and experienced in the related fields to support businesses to cope with the COVID-19 pandemic, addressing urgent issues such as: Labor, salary, credit, debt structure, closure of unprofitable businesses, setting up new businesses, applying support policies from the government … If you need any help, please feel free to contact us directly for advice support.
MESSAGE AND SIGNAL FROM VIETNAM
Opportunities and Optimistic news for Vietnam:
- Vietnam belongs to the safe economic group after the COVID-19 pandemic, according to The Economist. Vietnam ranked 12th after China and Guatemala, but ahead of Poland and Nigeria with numeral of public debts, external debts, borrowed expenses, and foreign exchange reserves which are under stable up to strong stage. Vietnam does not have any indicator of “red alert”.
- The International Monetary Fund (IMF) forecasted that Vietnamese economic growth within this year will slow down due to the impact of the COVID-19, but it may reach 7% in the year 2021.
- According to the government survey, 85.7% out of 126,565 businesses evaluated in Vietnam reported that they were negatively affected by the pandemic, in which companies participate in the field of aviation, tourism, food, and education are the most affected.
- Foreign investment within the first four months of the year fell by 15.5%, to about $ 12.3 billion USD, according to the General Statistics Office (GSO) data. However, Vietnam is aiming at the annual GDP growth which is up to over 5% this year. If truly achieve, then this will be a rare number of good growth when the global economy must face with deep degrade.
- The Ministry of Planning & Investment informed that VN has a good position to assist manufacturers in finding new production facilities.
- “These opportunities will include the investment shifting, especially the large multinational corporations which are seeking to diversify their supply chains to other regions, including Southeast Asia”, The Deputy Minister – Tran Quoc Phuong mentioned in a statement. “Vietnam is one of the first destinations”.
- EU provides 20-million-euro of non-refundable aid to support Vietnam strengthen their ability to cope with climate change and natural disasters, and concurrently to attempt to minimize the impact of COVID-19 pandemic.
- “The purpose of this 20-million-euro grant is to support Vietnam on their path towards the more sustainable and more resilient future,” said Giorgio Aliberti – the EU Ambassador.
=>> Perspective from VIVA: Although the general global economic trend was forecasted to decline, even if it shows degrade in between 2020-2021, however, Vietnam can promote their advantages to recover quickly or even upstream. CEOs can define long-term business plans to wait in front of the trend.
Vietnam “welcomes” many big companies in the world
- The effective process of controlling COVID-19 pandemic in Vietnam (VN) is creating the confidence for multinational corporations to see Vietnam as one of the safe destinations to build a global supply chain, avoiding the excessive dependence upon China (CN).
- Expressing this wave, Japan’s Nikkei news recently quoted sources from Apple saying that in the second quarter of 2020, the technological giant – Apple has plan to produce 3-4 million wireless AirPods headphones in VN. This figure accounts for 30% of the company’s total AirPods production. This is a sign that the company is shifting the production out of China amid the context of COVID-19 pandemic.
- Big corporations such as Hanwha Group of South Korea, one of the 500 largest corporations in the world, have inaugurated the factory of aircraft spare parts in Hanoi. Japan’s Yokowo Corporation, which specializes in manufacturing motor vehicles, has moved their location to Ha Nam province. Two major Japanese technology companies, Sharp and Kyocera, have announced they have canceled plans to produce LCDs, laptops, photocopiers, multi-function displays, etc. for the US market in China and will build factories in our country.
- A report by VNDirect Stock Company recently also said that Google and Microsoft are moving some production lines from China to Vietnam and Thai Land. The two big companies are expected to sell Pixel4A phones, Pixel5 phones and Surface computers in Vietnam in the second quarter this year. Similarly, big VIPs like Samsung, Intel, Nike, Adidas also participate in the trend of switching the manufacture to Vietnam.
- Michael Kokalari, the chief economist of VinaCapital Investment Fund, said the pandemic has led multinational corporations to rethink about the supply chain construction to avoid becoming dependent upon China. Meanwhile, effective measurements to prevent and control the pandemic of Vietnam have scored great points in the eyes of multinational corporations. Based on this, they recognize that Vietnam will be an “exit from China”, an attractive investment destination, and not prone to risks due to diseases.
- “For this reason, we believe there will be a huge flow of direct investment into Vietnam. Especially the wave of high-quality invested capital flows after the COVID-19 pandemic is controlled worldwide,” said Michael Kokalari.
=>> Perspective from VIVA: Large corporations entering Vietnam will create a pervasive effect, leading to the establishment and operation of both domestic and foreign enterprises, contributing to promote market demand, promoting the development. This is also a trend that brings business opportunities that CEOs need to keep in mind.
Bringing businesses back to normal operation in a new state
- Businesses need to quickly identify stratagems and strategies to adapt to a modified world with Covid-19, with a new ordinary and with strong changes that will happen next in the global economy.
- The Prime Minister agreed to allow the reopening number of sub-border gates, openings as proposed by Lang Son and Quang Ninh provinces.
For other sub-border gates and openings, the Prime Minister allows the People’s Committees of border provinces to base themselves on the actual local situation, seriously and carefully consider to proactively reopen sub-border gates and openings in the area following the principles of which Decree No. 112 has prescribed, ensuring the process of disease prevention and control. The Prime Minister emphasized to only restore the sub-border gates, openings with a large volume of goods, especially agricultural products, aquatic products, seafood exports of our country, and raw materials needed for domestic production.
- 6 additional online public services to support people who are in trouble due to COVID-19
- Since 12/5/2020, the National Public Service Portal will provide six additional public services to support people, businesses in need due to the COVID-19 pandemic.
- It is a service supporting employees to temporarily postpone labor contracts and take leave without pay; Supporting employers to loan capital to pay discontinued wages for workers; Declaring extension of corporate tax payment; Declaring extension of personal tax payment; Temporarily closing the retirement fund; Receive, handle feedback and recommendations in supporting people, businesses facing difficulties due to the COVID pandemic
=>> Perspective from VIVA: COVID-19 has and will pass, leaving consequences and valuable lessons in business, especially the strategic planning and risk management. In addition, there will certainly be many big changes in investment flows, macro policies of major economies such as EU, the US, China … and accordingly Vietnam will also have corresponding policies, bringing both opportunities and challenges for CEOs.
Economic recovery with “5 spearhead-attack”
The Prime Minister Nguyen Xuan Phuc has pointed out the ‘5 spearhead-attack’ to recover the economy, that are:
- Attracting investment in all economic sectors throughout the country;
- Boosting exports;
- Promoting public investment;
- Encouraging domestic consumption;
- And attracting FDI.
The bank needs macro stability and policies support from the state bank
- Reduce profits, simplify procedures, but cannot lower the credit standards.
- With the drastic guidance from the State Bank, the Commercial Banks have agreed to lower lending rates from 0.5-2.5% of lending rates to support customers in order to overcome difficulties caused by Covid-19 pandemic, even some Commercial Banks have reduced the lending rates up to 4% / year. According to the Department of Credit for Economic Sectors (SBV), scale of the credit program that Commercial Banks deploy is about 300 trillion VND – essentially a normal credit program, which takes the main source of money from citizens and businesses that banks are paying interest on deposits – to support businesses, individual business households … affected by Covid-19. The basic lending mechanism and process are similar to ordinary commercial loans, just a quick, more flexible procedure, and the interest rates are more preferential than the ordinary lending rates from 0.5 to 2.5% / year.
- The State Bank of Vietnam announced to continue lowering interest rates to stimulate the economy and provide fiscal support on a large scale. The new interest rate will be applied since May 13th, 2020
The announcement shows that it will reduce by 0.5 points of % on refinancing loans, rediscounting, overnight lending in electronic interbank payment and
offset the shortage of capital in the clearing of the SBV to other banks.
- Banks such as Vietcombank, VP Bank, TP Bank …. have launched supportive packages including interest rate reduction, debt structure, and debt rescheduling for corporate customers affected by the Covid-19 pandemic.
=>> Perspective from VIVA: With the policy of stimulating demand, increasing public investment to promote economy, the general trend in the near future is that the lending rates will decrease. This is an opportunity for businesses to restructure loans, restructure capital, plan to expand new investment projects.
Message and signal from America – China relation
- Relationship between the two countries has tended to be strained recently when the US Government accused China of hiding the seriousness of Covid-19 pandemic, leading it to spread and become a global pandemic.
- In a discussion through telephone between the Chinese Deputy Prime Minister – Liú Hè and the U.S. Trade Representative – Robert Lighthizer and the Treasury Secretary – Steven Mnuchin, two sides committed to create advantageous conditions for the implementation of phase 1 on the trade agreement between the world’s two largest economies.
- In addition, the two countries agreed to cooperate with each other in economic and public health. The two sides also agreed to maintain contact.
- On 12/5, the Chinese Ministry of Finance announced the second list consisted of 79 different products, including rare earths, of the US entitled to import tax exemption policy. Specify that the new regulation will be applied for at least one year, starting from 19/5.
- The step was made in the context when China seeking to renegotiate the first phase of trade agreement with the US that the two countries have agreed earlier this year. However, President Donald Trump does not support to reopen these discussions.
=>> Perspective from VIVA: The trend of this strained trade and mutual distrust between the US and China is still increasing, not only the American businesses but also European, Indian and Japanese businesses … are clearly moving their production activities to other countries, of which Vietnam is a bright choice. This is also an important trend must be noticed in business strategy planning.
China may face the risk of isolation in the new world economic order after the Covid-19 pandemic
The US invites Vietnam to have a dialogue with the “QUAD group” to restructure the supply chain
- The US plans to establish a “Prosperous Economic Network” with a dialogue of the “QUAD group”, including the US, Australia, Japan, India and invites three other countries which are Vietnam, South Korea and New Zealand.
- Recently, the group of 4 countries of India – Pacific Ocean, including Australia, Japan, India, and the United States officially resumed the 4-party dialogue after 10 years of interruption, the group has upgraded to dialogue of foreign ministers. On March 20th, the “QUAD Group” group invited three other countries including Vietnam, Korea, and New Zealand to discuss, this new group was called “QUAD Plus” by the India Times.
- Although it was just informed on Heritage, the content of this dialogue between diplomatic officials from countries only revolved around COVID-19 but the reporters from Reuters (UK) and CGTV (China) have pointed out that, “minimizing the impact on the global economy” is the key issue of Quartet Four dialogue.
- Reuters quoted a speech by Mike Pompeo, the US Secretary of State, on CNN about the expansion of negotiation members: “We are working with friends to promote the development of the global economy”. The US’s move and the extended quartet group made global media aroused. Reuters implied, the US is aiming to build the national group of “Prosperous economy network”.
=>> Perspective from VIVA: Reducing negative impacts from COVID-19 is one of the important goals of the US and all other countries. The fact that Vietnam joining the QUAD Plus will bring advantageous and strong investment opportunities, both sides from Vietnam to the countries belonged to QUAD as well as investors from the QUAD to Vietnam. This is also a favorable opportunity for businesses that have been doing business with the US, Australia, Japan, and India.
The Asian economies are diversifying from China
According to Bloomberg report
Relocation from China is not only common among the US companies. Nowadays, the pandemic has made more countries and regions want to “repatriate” their supply chain. The purpose of these moves is to reduce China’s manufacturing dependence which are spreading all over Asia.
- Taiwan: The government has sought to bring at least some of their companies back from the mainland. The success of these programs is one of the reasons why Taiwan’s economy outperformed compared to South Korea and other regions last year. In 2019, Taiwanese companies received $ 217 billion NT ($ 7.2 billion USD) from Chinese mainland according to an incentive investment program. By the end of April, Taiwanese companies that have received Chinese mainland investment for more than two years have promised to invest $ 752 billion NT, based on the Government’s report this month.
- Japan: This is another economy seeking to encourage their companies to leave China, spending $ 2.3 billion USD in simulative packages to help companies move their supply chains back to Japan or to other places. Although the budget has just been approved and companies may be waiting to see how disrupted the economy is, at least one company, Iris Ohyama Inc., has announced that they will start producing domestic masks, besides the two factories are China.
- India and Vietnam: When some investors take their eyes off China, other economies are trying to attract that money. Vietnam has become a favorite destination for foreign investors – who are seeking to an alternative manufacturing center for China after escalating a strained trade with the US. Nowadays, India is also looking forward to attracting businesses moving out of China.
=>> Prospective from VIVA: The US may have noticed China’s weaknesses since the century pandemic. No matter how tense is the US-China situation, Vietnam is still benefiting. The fact that Vietnam has been invited to the dialogue of the “QUAD Group” group has shown that we are highly appreciated, and this will be a great opportunity for Vietnam to not only recover economy but also considerable develop if we take full advantage of this and well promote.
VIVA is the local expertise for local business compliance procedures, has been trusted by thousands of foreign investors, multinational companies from Europe, Japan, Singapore, India, Korea, USA… for the required business compliance procedures by local laws and regulations since 2006. Thanks for consistent of practice expertise in Business laws - Employment relations – Tax and accounting – Corporate finance – Corporate services, VIVA has been successfully providing service for thousands of leading companies in such industries: Garment, energy, pharma, advertising, agricultural… VIVA keeps its signature by offering one-stop business platform with regard to market entry and the mandatory business compliances. We ensure for our client’s good standing, in lawful and optimal manners whenever they are working and doing business in Vietnam.
ABOUT VIVA BUSINESS CONSULTING
VIVA is the local expertise for local business compliance procedures, has been trusted by thousands of foreign investors, multinational companies from Europe, Japan, Singapore, India, Korea, USA… for the required business compliance procedures by local laws and regulations since 2006.
Thanks for consistent of practice expertise in Business laws - Employment relations – Tax and accounting – Corporate finance – Corporate services, VIVA has been successfully providing service for thousands of leading companies in such industries: Garment, energy, pharma, advertising, agricultural…
VIVA keeps its signature by offering one-stop business platform with regard to market entry and the mandatory business compliances. We ensure for our client’s good standing, in lawful and optimal manners whenever they are working and doing business in Vietnam.
Read more about COVID-19 in Vietnam latest news:
Payment Of Wages And Benefits For Employees During Work Suspension Due To Covid-19 Pandemic