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Vietnam’s businesses warned of being acquired by foreigners

Many businesses will struggle if the pandemic lasts a long time, leaving them vulnerable to foreign takeovers, experts say.

The recent Ministry of Planning and Investment’s (MPI) report showed the great impact of COVID-19 on businesses’ health.

 

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Most surveyed businesses estimate sharp falls of 40-50 percent in revenue compared with 2019, while production costs are on the rise. There will also be a possible sharp cut in labor force.

Most businesses said they can ‘hold out’ for a short time: 35 percent can hold out for three months, 38 percent for six months, 13 percent for one year, and 14 percent for more than one year.

Many factories have begun laying off workers or rotating production. There are a many businesses in danger of shutting down or going bankrupt.

Many factories have begun laying off workers or rotating production. There are a many businesses in danger of shutting down or going bankrupt.


That is why MPI warned that M&As of businesses will take place more regularly, and that more Vietnamese businesses will be taken over by foreigners at low prices. These include medium- and large-size enterprises.

MPI also expressed worry that the number of businesses to leave the market in the upcoming time may be even higher as their ability to endure hardship has reached the critical point.

Pham Viet Anh, an expert on business growth strategy, warned that if social distancing is extended for several more months, businesses will struggle. This will give golden opportunities to foreign enterprises to swallow up Vietnam’s businesses.

Anh said on Saigon Dau Tu that many small and medium enterprises (SMEs) have become paralyzed. Larger enterprises just have enough cash to maintain operation for several more months. It is still unclear when the epidemic will be contained. The downsizing will only help businesses exist until the end of the year.

“The share prices of many enterprises with good foundation have also decreased sharply by up to 50 percent. They are prone to be taken over by foreigners,” he said.

In woodwork and wooden furniture manufacturing, 93 percent of businesses have and are going to suspend operation, or have scaled down production, laying off 45 percent of workers. The tourism sector has suspended its operation.

According to VCCI (Vietnam Chamber of Commerce and Industry) chair Vu Tien Loc, nearly 85 percent of businesses said the epidemic has shrunk their markets and nearly 60 percent of businesses lack capital and have problems with cash flow.

Anh thinks it would be better to find a way to ‘live together with the epidemic’. At least, it is necessary to create favorable conditions for enterprises to ‘live’ in the domestic market now before they return to normal operation. 

Linh Ha

 

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