Vision for Salvation

I have heard many petitions from business representatives. Everyone complains about difficulties and asks the government to “rescue” them.

I serve on the executive committees of several central and local business associations, so I have received many opinions from the business community recently. In the building materials sector where my company operates, entrepreneurs share that they have had to scale back production, and many companies have had to suspend operations for the past two months. One director said if the current situation extends for another one or two months, no less than 30% of companies in the industry will go bankrupt.

Another person, who runs a tourism company, has had to give employees nearly three months off. His company, like most travel businesses, has zero revenue. He saw reports about the government’s economic rescue packages, those from Ho Chi Minh City, and banks, and felt hopeful. “I am hoping to be rescued,” he told me.

On May 5th, at the conference on “Restoring and Developing Ho Chi Minh City’s Economy” attended by city leaders and representatives from nearly 100 businesses from various sectors, we heard many opinions. What caught my attention was that all of them complained about difficulties, lamented hardships, and requested government support for their own businesses. This way of thinking is not new. Not only because of Covid-19, for many years businesses seem to take advantage of meetings with government representatives to complain, list difficulties, and then propose or petition for changes, primarily for their own companies. For example, at this meeting with the City Committee, some requested VAT and corporate income tax reductions; others petitioned for bank loan interest cuts and debt rescheduling; some proposed reductions in social insurance contributions. Notably, some suggested across-the-board corporate income tax cuts.

Most entrepreneurs also complained that “it is very difficult to access rescue packages.” The Chairman of Ho Chi Minh City’s Business Association stated that only 8% of enterprises in the country’s economic locomotive accessed policies supporting workers; 28% accessed policies related to capital; 31% accessed tax-related policies. Even when they could access them, the number of entities that actually received disbursements was much lower, with many lamenting that “they could not receive it.”

I believe the entrepreneurs have their reasons. However, sitting through the entire meeting, I thought differently. How to get my company to benefit from the government’s multi-trillion VND rescue packages is less important to me than the question of how to ensure that the rescue funds truly reach those in need and avoid manipulation by vested interests. More importantly, how to ensure that no one is left behind in this rescue race; to clarify the question: who really needs the “rescue” the most?

Nearly 80% of companies listed on the Vietnam stock market reported profits in Q1, according to the State Securities Commission. As of April 20, 2020, there were still 571 companies reporting profits. Meanwhile, most of our businesses are small, medium, or micro enterprises, playing a vital role in the economy. I believe this group needs the most support because they are the ones creating jobs. During this pandemic, very few of them are profitable; most suffer losses, dissolve, or go bankrupt. If they are losing money, where will they have “taxable income” to qualify for tax exemptions or reductions? If the government cuts corporate income tax rates across the board, the biggest beneficiaries will be large, profitable companies. Smaller, possibly struggling businesses will not benefit.

Similarly, for the proposal to reduce VAT, only essential sectors, products serving people’s livelihoods or raw materials for production truly deserve to be “rescued.” Imagine, do buyers of luxury goods, alcohol, tobacco, or even cars really need VAT cuts? They do, but not as much as families who struggle day-to-day, week-to-week, recently losing jobs or having their salaries cut. This remains unclear to date.

Foreign investors have net withdrawn nearly VND 20,000 billion from the Vietnamese stock market over the past three months. Most Vietnamese enterprises are cash-strapped. They rely only on limited “known” sources of capital and still face great difficulties accessing credit. Meanwhile, just the top 10 “cash kings” hold over VND 180,000 billion, about 35% of all corporate cash, according to listed companies’ statistics. A significant portion of this money is kept in savings accounts earning interest at banks. The 18 listed banks all posted profits in Q1/2020 with total after-tax profits exceeding VND 21,000 billion. So why haven’t regulators lowered interest rates further so more businesses can access cheaper capital?

Let me emphasize: not all companies have suffered due to Covid like the tourism and service sectors. Listed companies in electricity, water, petroleum, and gas sectors still made huge profits, over VND 4,000 billion in Q1. Basic resource companies also reported profits of more than VND 3,000 billion. These companies are mostly state-owned conglomerates. Their participation in “complaining and begging” for government rescue packages is very distasteful. Instead, we can expect them to quickly reduce service prices for businesses and people.

For the first time in a long time, the government has regained positive trust from businesses and people through effective pandemic control. Now, as economic support packages launch, I believe continuing to build that trust is even more important. It demonstrates that the government acts transparently and fairly. Only in this way, after overcoming this crisis, will businesses and the public have stronger confidence in an effective and transparent government, especially in the run-up to the 13th Party Congress.

Dinh Hong Ky