Restructuring markets for sustained growth
Restructuring markets for sustained growth
The coronavirus epidemic is pushing Vietnam to boost economic restructuring, diversify export markets, and apply urgent measures in favour of the business community and the people.
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Together with numerous enterprises and business associations, the Vietnam Tourism Advisory Board last week met with the Ministry of Planning and Investment (MPI) to talk about their member companies’ woes caused by the rampant novel coronavirus (COVID-19) epidemic.
According to the board, prior to the outbreak, Vietnam welcomed about 700,000 Chinese tourist arrivals a month. Their monthly spending amounted to VND7 trillion ($304.3 million). Last year, 5.8 million Chinese came to the country, accounting for 32.2 per cent of all international tourists. However, no Chinese person visits Vietnam now.
The board estimated that if the COVID-19 emergency ends in the first quarter of 2020, the total direct loss for the tourism industry in the first three months of 2020 could be $6-7 billion. However, if the epidemic is contained in the second quarter of the year, the total direct loss of the industry in the first half of the year may be $15-18 billion.
According to the MPI, COVID-19 has negative impacts not only on tourism, but also on almost all industries, which heavily rely on imports and exports to and from China. For example, the manufacturing industry has been feeling the pinch from the outbreak. Many major technological and manufacturing groups in China such as Toyota, Hyundai, Foxconn, Samsung, LG, and Apple have temporarily shut down their plants in China.
Hyundai has decided to extend a $1 billion package to support companies globally that supply materials and equipment. The package is implemented in the form of loans or technical support. In another case, Apple is reported to be suffering from a loss. Though it does not conduct any direct manufacturing in Vietnam now, it has many partners in the country such as LG and Foxconn. In its initial plan, Apple was to heavily increase its exports from Vietnam-based partners remarkably. However, the outbreak may undermine this plan this year, a representative of the MPI’s Foreign Investment Agency said.
According to the MPI, all enterprises in industries such as textiles and garments, electronics, automobiles, and pesticides are facing difficulties due to material shortages, 30-60 per cent of which are imported from China. “Enterprises’ material stock can help them maintain production until late February. If material shortages continue, they will have to halt production in March,” stated a report from the MPI’s Agency for Enterprise Development. “The hindered production will take a heavy toll on economic growth, budget revenue, employees, and the whole society.”
The MPI estimated that if COVID-19 ended by April, Vietnam’s first-quarter export turnover would be $53.9 billion, down 8.3 per cent on-year, with turnover from China being $6.8 billion, down 9.5 per cent on-year. Vietnam’s first-quarter import turnover would be $55.5 billion, down 3.2 per cent on-year, with turnover from China being $14 billion, down 13.6 per cent on-year.
In case of the epidemic lasting until late June, Vietnam’s second-half export and import turnover would hit $58.5 and $62 billion, respectively, down 8.1 and 3.1 per cent on-year.
With such negative impacts, if the epidemic was eradicated in the first quarter, the GDP for 2020 would likely rise by 6.25 per cent on-year, with the climbs of the first, second, third, and fourth quarters being 4.52, 6.08, 6.92, and 6.81 per cent, respectively. If COVID-19 was brought under control in the second quarter, the GDP this year would likely ascend by 5.96 per cent on-year, with the growth rates of each quarter being 4.52, 5.1, 6.7, and 6.81 per cent, respectively.
Minister of Planning and Investment Nguyen Chi Dung said that despite great difficulties, now is the time for Vietnam to review its health and resilience, and boost economic restructuring, with less dependence on a single foreign market. “This is also a chance to find ways to diversify export and import markets, increase public investment, and spur on growth, laying a foundation for 2021 and beyond,” he said.
Minister Dung ordered all relevant departments and agencies in his ministry to review investment projects. Procedures for all major projects invested by the state and the private sector must be expedited so that they can become operational. “While private investment has slowed down, increasing public investment will help businesses recover production,” he said.
Currently, VND227.45 trillion ($9.89 billion) worth of public investment for 2020 remains undisbursed. The MPI also sees that, amid the COVID-19 outbreak, many sectors can benefit, such as e-commerce, online shopping, delivery, and ICT.
The Central Institute for Economic Management (CIEM) is now compiling a special report on economic restructuring, which will be submitted to the MPI before being submitted to the prime minister. “Regulations for e-commerce and ICT must be improved, facilitating the operation of enterprises,” said CIEM director Tran Thi Hong Minh.
Last week, Prime Minister Nguyen Xuan Phuc confirmed the 6.8-7 per cent economic growth target for 2020. “We have an opportunity to reorganise production and restructure the market, as well as to focus more on the domestic market and diversify and expand export markets,” he stressed.
