Leading companies must take central role in economic recovery, says expert

Economist Nguyen Dinh Luong, former Vietnam’s Chief Negotiator of the US-Vietnam Bilateral Trade Agreement, in an interview with Hanoitimes talked up the role of industry-leading companies in helping the economy overcome Covid-19.

Economist Nguyen Dinh Luong. Photo: Kinhtedothi

The making of industry-leading companies is seen as a major step towards building a strong business community that could spur Vietnam’s economic growth. How do you view this vision in the current context of the Covid-19 pandemic?

The recent 13^th National Party Congress has stressed the significance of promoting the development of strong private and state-owned corporations that are capable of competing at regional and international levels in priority fields.

In the past and present, whenever the country is in a crisis, Vietnamese businessmen have shown their patriotism through specific action, an in this case their role of leading the economy back to the growing trend.

From the economic perspective, what do you think about the importance of these leading companies to the economy?

The Covid-19 pandemic has persisted for nearly two years and caused tremendous hardship for enterprises. A latest survey the Vietnam Chamber of Commerce on over 10,000 enterprises revealed up to 87.2% of the total are affected by the pandemic.

Layoffs are seen mostly in private enterprises of micro and small size with respective rates of 36% and 35%. The burden to help the economy recover will mainly fall on the shoulder of large-scale corporations, mainly because they still have the resources to deal with current difficulties.

The fact that Vingroup owned by billionaire Pham Nhat Vuong donated four million Covid-19 vaccines to the Ministry of Health; Viettel provided VND450 billion (US$19.5 million) into the Vietnam Fund for Vaccination Prevention of Coronavirus Disease 2019 (VFVC); Electricity Vietnam, Vietnam Oil and Gas Group, and Vietnam Posts and Telecommunications Group each supported VND400 billion (US$17.4 million); demonstrating their strong financial capabilities.

Large scale corporations have strong links with global value chains, and therefore, would recover much faster than their smaller peers when the global economy returns to the growth path, not to mention their much stronger resilience against external shocks.

Should the government focus its support on large-scale enterprises?

Yes, I think so. In 2020, the government focused on freezing and delaying payment of taxes, land rental fees. This year, the business community is expecting more substantial supporting policies to recover and grow in the post-pandemic period.

Large enterprises, making up 80% of state budget revenue sources, are in needed of market opening, policies for production expansion, and easing border control for foreign experts to return.

During the Covid-19 period, Vingroup has set up pharmaceutical company Vinbiocare with registered capital of VND200 billion (US$8.7 million). The firm is actively working with foreign partners to transfer vaccine production technology to Vietnam. Recently, Vingroup has sealed a deal with Singapore-based Breathonix to acquire 30 Covid-19 breath testing systems, the first of its kind in the world, worth VND460 billion (US$20 million).

The system, which has received provisional authorization Singapore’s Health Sciences Authority (HSA), could produce results with up to 90% of accuracy and in a non-invasive manner. Vingroup is expected to hand over the system to the Ministry of Health upon arrival in Vietnam

I think with a more open vaccine policy, major enterprises could find their own way to save themselves and also contribute to protecting public health.

What measures should the government focus on at the moment?

Enterprises, regardless of their sizes, are facing common issues of market access, working capital, workforce, and supply chains, which the government should take into consideration when drafting rescue packages.

There should also be different scenarios for these packages to be disbursed as quickly as possible once the pandemic is contained. Experiences the US and other countries show they have set up various pandemic scenarios for each state, city and planned to take actions accordingly.

In this regard, priorities should be given to enterprises that have fulfilled their tax obligation, while the government should provide them with financial support for Covid-19 prevention measures.

Meanwhile, enterprises that have gone bankrupt or suspended operations should be included in social protection packages.

How could the government turn this crisis into an opportunity for stronger growth?

In addition to short-term support, the government should focus on administrative reform by saving costs and expenses for enterprises, especially in investment, trade procedures, and measures to help them gain greater market access. 

On the other hand, while there has been a shift in foreign investment capital into Vietnam, measures are needed to strengthen the linkage between local and foreign enterprises, while the domestic market should be the focus of local firms.

Another key issue is the urgency for major economic corporations to embark on the digital transformation process, as this is the key step to help them reduce operational costs during the pandemic.

Thank you for your time!