Declining business confidence due to COVID-19

More than 87% of local businesses affected by COVID-19

According to the 2020 Provincial Competitiveness Index (PCI) survey, the COVID-19 pandemic has led to a widespread negative impact on the operations of local enterprises. More than 87% of them, including domestic private and foreign-invested firms, have reported that their operations last year were heavily impacted by the global pandemic.

The proportion of businesses reporting the impact of the pandemic as "completely negative" stood at 15% for domestic private enterprises and 13% for FDI firms, respectively. Only 2% of businesses, of which less than 1% are FDI enterprises, rated COVID-19 as having a "positive" effect, while approximately 11% of each group said they have suffered no impact from the pandemic.

Dau Anh Tuan, director of PCI Project and head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), says that the narrowed domestic market coupled with disrupted supply chains represent the largest difficulties facing local businesses.

“COVID-19 has greatly affected business operations of various sectors from garments and textiles, tourism to aviation, and transportation which all endured a decline in revenue compared to the previous year. 30% of businesses said they had to lay off their employees. This is a very high rate, severely affecting enterprises' operations,” Tuan states.

This comes as the turnover of numerous local firms in 2020 came in significantly lower due to travel limitations of consumers as they tried to either protect their health or comply with social distancing measures. Due to this, roughly 66% of domestic private firms and nearly 62% of FDI enterprises reported a fall in revenue last year. On average, business revenue dropped by about one thirds in comparison to 2019’s figures, he adds.

Decline in business confidence

Business size over the next two years is forecast to decrease significantly in comparison to a figure of 51% recorded in 2019. This marks the third lowest level since 2006, when the PCI survey initially began on a national scale.

This figure is only higher than the bottom recorded in the 2012 to 2013 period when the Vietnamese economy faced the dual impact of the global financial crisis coupled with domestic macroeconomic instability.

"In the 2020 PCI survey, up to 13% of businesses plan to scale down their business operations or close down. This is the highest level in 15 years since the VCCI conducted PCI surveys in all provinces and cities nationwide," the PCI Project director says.

Many local businesses have therefore devised solutions aimed at dealing with the pandemic as well as setting out long-term solutions, such as changing and diversifying supply sources to the market whilst boosting digital transformation.

Local authorities across all levels should therefore give priority to assisting businesses and citizens to overcome the negative impact of the pandemic in a fair and appropriate manner. In particular, it can be viewed as necessary to consider investing resources in retraining and providing skills for workers who have lost their jobs due to COVID-19.

This is due to many labourers currently looking for jobs in sectors capable of responding to the crisis in a more flexible way, the PCI Project director emphasizes.