Maintaining reforms in COVID-19, but businesses are facing trouble

Gauge of business confidence of private enterprises through PCI surveys.

Handling administrative procedures more efficiently

Regarding the business environment, Mr. Dau Anh Tuan, Head of Legal Department, Vietnam Confederation of Trade and Industry (VCCI), said the results of data analysis of the Provincial Competitiveness Index (PCI) in 2021 showed the efficiency of administrative procedures has continued to be improved in recent years.

Specifically, 87% of enterprises agree that “officers deal with work effectively”; 75% of businesses agree with the statement that “enterprises do not have to spend much time to complete the procedure.”

Mr. Than Duc Viet, General Director of Garment 10 Joint Stock Company, said that localities, as well as many agencies and ministries, have improved administrative procedures, creating favorable conditions for business. In which, tax and customs procedures have improved most, with a simpler tax policy when e-invoices are made; customs clearance procedures are also accelerated, especially when Garment 10 has been recognized as a priority enterprise by Customs for nearly 10 years, helping businesses not only reduce time but also save a lot of labor costs and transportation.

“In the past, on average, a shipment took one to three days to get customs clearance, now it only takes a few hours. Therefore, the reforms of the Customs sector have helped Vietnamese enterprises to ensure timely delivery of raw materials and accessories for production," said Mr. Than Duc Viet.

However, some administrative procedures cause trouble for enterprises to comply with, such as procedures in the fields of land, construction, fire prevention, etc. The reason may be due to Government agencies have to focus on both fighting the pandemic and developing the economy, so resources and capacity are scattered during the pandemic.

“Only 38.9% of enterprises did not face any difficulties when carrying out administrative procedures for business licenses for conditional business lines and 43.4% of enterprises said that the processing time did not take longer than compared with regulations," Mr. Dau Anh Tuan said.

Therefore, businesses recommend provincial and city governments to continue to strongly reform administrative procedures, especially business licensing procedures, land administrative procedures and convenience in land access. In the new context, provincial governments need to strengthen support and guide businesses to exploit opportunities from international economic integration as well as have effective programs to support small and medium enterprises.

Private businesses feeling more insecure

In 2021, Vietnamese businesses, as well as the economy, have been seriously hurt by new waves of the Covid-19 pandemic. Therefore, the PCI 2021 survey shows that the five biggest difficulties businesses face include accessing capital, market fluctuations, finding suitable personnel and finding new partners.

Therefore, the proportion of enterprises intending to expand their production and business scale is only 34%, continuing to decrease compared to the corresponding value of 41% in 2020.

This result is equivalent to 2012 and only more than two percentage points higher compared to 2013 - the year when the level of optimism of Vietnamese businesses dropped to the lowest level in more than a decade.

In 2021, for the first time, up to 16.59% of businesses reported that they intend to reduce their business size or close their businesses. This is the highest level in the 17-year history of PCI.

According to the General Statistics Office, Covid-19 is a special challenge for small and medium enterprises in 2021, when nearly 120,000 domestic private enterprises withdraw from the market – 17.8% higher compared to 2020.

Source: PCI 2021

In addition, businesses have many concerns about cash flow, but more focus is on Vietnamese enterprises. Foreign-invested enterprises are less affected as they typically have higher sales volumes, a more diversified customer base and the ability to access alternative sources of capital and financing. Meanwhile, the PCI survey has shown the impacts on different groups of enterprises. Specifically, exporters reported more difficulties in managing and participating in supply chains as well as accessing international customers. Exporting enterprises also have faced difficulties in maintaining personnel.

From this situation, the PCI report makes the conclusion that Vietnamese private enterprises feel significantly more insecure than FDI enterprises. Exporters appear to be recovering faster and are more optimistic about the future, but private exporters may need to be supported by more tailored support programs.

However, businesses need to "self-advocate" to enhance opportunities, in which it is necessary to focus on digital transformation and automation.

In the year 2022, according to Mr. Dau Anh Tuan, Vietnam officially changed its pandemic prevention policy to "safely adapt, flexibly, effectively control the Covid-19 pandemic" with a focus on restoring activities. The lifeblood of the economy such as circulation, transportation of goods, production, business, and service activities. These policy movements have begun to take effect, allowing us to forecast that PCI businesses in the next year will enjoy significant prosperity.