According to the General Statistics Office of Vietnam (GSO), in the first quarter of the year, the number of newly established enterprises was 29,300, down 1.4%, while the number of businesses withdrawing from the market was 40,323, up 15.5% year on year. On average, 13,400 businesses leave the market every month.

Economic experts said that it is normal for businesses to withdraw from the market. However, for the first time in the past decade, the number of businesses leaving the market is higher than newly formed ones. The main reason is the impact of the pandemic.

According to the report "Assessment of the Covid-19 epidemic’s impacts on Vietnamese enterprises" released by the Vietnam Chamber of Commerce and Industry (VCCI) in mid-March, the Covid-19 pandemic that broke out in early 2020 seriously impacted the production and business activities of local enterprises.

The prolonged Covid-19 pandemic has caused production and consumption to stagnate. (Illustrative image).

According to VCCI, 87.2% of businesses have been affected by the Covid-19 epidemic. Most businesses said that the epidemic had affected their access to customers, cash flow and employees. Many businesses have seen their supply chains broken and cash flow imbalanced, and have had to lay off workers.

The employment market in the first quarter of 2021 was quite gloomy. According to the General Statistics Office, nearly 1.1 million people of working age were unemployed, an increase of 12,100 people year on year. Statistics on the employment situation in Q1/2021 have reflected the difficulties and fluctuations of the economy.

The Vietnamese Government has issued many solutions to support businesses, but many companies have not gotten rid of difficulties. The new wave of Covid-19, which started in late April, has put pressure on production and business activities of many enterprises. According to VCCI, the most affected industries are tourism, retail, passenger transport, motor vehicle production, and beverages. Newly established businesses are the most affected.

Experts said that it is necessary to continue fight Covid-19, and at the same time remove difficulties for businesses and perform institutional reform. Supporting businesses to maintain operations is an urgent solution, they said.

The poor are more vulnerable in the pandemic.

On April 19, the Vietnamese Government issued Decree 52/2021/ND-CP on extending the deadline for payment of value added tax, corporate income tax, personal income tax and land rent in 2021 for enterprises, organizations, business households and individuals engaged in production activities in more than 50 fields.

Economist Tran Dinh Thien said that besides financial support packages, and tax relaxation and reduction for businesses, it is necessary to keep the policy environment stable and avoid increasing taxes and fees during this time.

According to VCCI, the most common proposal of businesses is that the Government should not increase taxes and fees.

The increase in taxes and fees affects not only businesses but also people. According to the Institute for Economic and Policy Research (VEPR), Vietnam is a low-middle-income country with per capita income of $3,500/person/year, so increasing taxes and fees will affect everyone, but the most affected will be the poor, who are more vulnerable in the pandemic.

Tax and fee increase also affects the purchasing power and revenue of businesses, leading to a decrease in revenue and job cuts, and an increase in unemployment.

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