Despite being hit hard by the COVID-19 epidemic, many Vietnamese businesses have been quick to catch up with the trends and switch to new products to gain decent growth amid the major shift in global consumption.
|Face mask is one of the products with advantages during COVID-19. (Photo: NDO/To Viet)
At this time, some listed companies have begun announcing their business results from the first quarter of 2020. Many reported sharp falls in revenue and profits, and some even posted losses due to scaled-down production and difficulty in the cash flow. But against this background, there are still some enterprises which have made a successful comeback.
Digiworld posted a growth rate of 63% in the January-March period and after-tax profits up nearly 80%, with revenue coming mainly from smartphones, tablets and notebooks. In the construction sector, Vicostone, a manufacturer of building materials, posted first-quarter revenue and profit growth of 20.68% and 14.39%, respectively.
FPT, a major technology firm, also reported good results in the first quarter thanks to its software outsourcing business continuing to grow as a result of a rapid shift in global technology. It is also one of the few companies to have maintained jobs and wages for its nearly 36,000 employees.
In the General Statistics Office (GSO)’s report, there are still some highlights within the not very promising economic picture, namely pharmaceutical and fuel production, which grew by 28.3% and 22.4%, respectively, said Pham Dinh Thuy, head of the industrial statistics department.
It is noteworthy that electronics, computers and optical products had been projected to see a slowdown due to interruptions to supply but still managed to grow by 4%, thanks to Samsung’s new phone releases and LG’s shifting of its phone production line from the Republic of Korea to Vietnam’s northern port city of Hai Phong.
Refined oil products also maintained growth as the Dung Quat and Nghi Son Refineries had forged production and consumption links with foreign-invested firms in Vietnam.
Bank support needed
According to the Ministry of Industry and Trade (MOIT), even well-performing sectors like electronics are expected to face a great deal of difficulties in the time ahead as the COVID-19 epidemic will slash demand for electronic products in the US and Europe, which account for 17% and 24% of Vietnam’s phone exports, respectively. The respective figures for computers are 17% and 14%.
In general, the epidemic is expected to affect businesses in many sectors in the next six to 12 months. After the difficult period, enterprises will need some time to restore their normal activity.
In accordance with the government’s instruction, the State Bank of Vietnam and credit institutions have proactively cut lending rates by 0.5-1 percentage points and introduced new loan packages. But the requirements for such packages are rather complex and there are few enterprises that are eligible for interest rate cuts. Therefore, direct support from the government and central bank is needed to bolster businesses.
The MOIT has recommended a special credit package to support struggling enterprises by offering loans at low interest rates or extending the debt servicing period.
In a report assessing the impact of COVID-19, a research group of the National Economics University stated that the epidemic has hurt many businesses badly but also has also created an opportunity for certain businesses to grow further.
Businesses with advantages during the epidemic are online shopping, food, essential products, face masks, hand sanitisers and body temperature meters. These are emerging sectors and most banks’ lending programmes have not covered them. Therefore, banks should capitalise on these new markets in order to diversify their customers and reduce risks from COVID-19 in current segments.
In addition to special products for potential customers, banks also need to develop short-term credit products to support small and medium-sized enterprises to weather the impacts of COVID-19.
According to GSO Director Nguyen Bich Lam, the COVID-19 epidemic has only really began affecting Vietnamese enterprises in the past month but some sectors have seized on new opportunities for growth such as banking, insurance and communications. The communications sector reported growth of 10%, the highest in the past ten years but such growth was just the beginning as there are yet specialised products for each market segment.
The post-COVID-19 period will bring about comprehensive changes in economic development viewpoint, structure and approach, requiring greater application of science and technology. As such enterprises need to proactively catch up with this trend to prepare their resources, ready to seize on new opportunities in the future.