As Vietnam has effectively put the Covid-19 pandemic under control, the economy is adjusting to a new normal, in which enterprises are scambling to find a new direction to sustain growth and rationalize operating costs at the same time.

As the Vietnamese economy is adjusting to a new normal, leaders of enterprises should be active in finding a new direction for future growth. Photo: Hai Linh.

Identifying changes

At a recent government meeting, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said given the complicated Covid-19 situation globally and Vietnam’s major export markets in crisis, Vietnam should remain cautious about reopening its economy.

The International Monetary Fund (IMF) has revised up Vietnam’s GDP growth forecast for this year to 2.4% from 1.6%, attributing such positive growth to Vietnam’s swift actions to contain the health and economic fallout of Covid-19.

Nevertheless, the outlook is subject to substantial uncertainties stemming from possible renewed outbreaks, a protracted global recovery, ongoing trade tensions, and corporate distress, which could translate into firm closures and bankruptcies, labor market and banking system strains, IMF asserted.

Therefore, Vietnam’s next economic development strategy should fully take into account all these factors, stated Mr. Loc.

Mr. Loc noted the main driving force for growth is institutional reform. In 2016, the government initiated its first campaign to remove obsolete and unnecessary business conditions. Two years later, a second campaign was launched to remove 50% of existing business conditions. For this year, the government targets to cut an addition of 20% to take Vietnam into top four-business friendly countries in ASEAN.

Economist Vo Tri Thanh said the Covid-19 pandemic has resulted in growing global uncertainties, in this context, economic forecasts from credible institutions such as the IMF and the World Bank have not been as accurate as before.

Mr. Thanh said many enterprises are now mapping out short-term business strategies of up to three years.

New standards in post-Covid-19 period

Despite mounting difficulties, there remain opportunities for enterprises in the post-Covid-19 period, said Hoang Duc Hung, vice general director of PwC Vietnam.

Mr. Hung said there are now changes in enterprises mindset regarding costs. For example, some expenditures that were previously seen as fix are now considered variable, such as office rental fee.

Meanwhile, strategies that could make a difference in enterprises’ competitiveness in the pre-Covid-19 period, such as automation or technologies for working remotely are now the minimum requirement to ensure efficient operation.

Therefore, as the Vietnamese economy is adjusting to a new normal, leaders of enterprises should be active in finding a new direction for future growth.

Vice Managing Director of the US–ASEAN Business Council Vu Tu Thanh said new global value chains are being formed in the post-Covid-19 period, in which US enterprises are looking to shift their production chains out of China.

While the shift actually began six years ago, it was accelerated through the US–China trade war, and later, the Covid-19 pandemic, he noted. In this regard, Vietnam has emerged as the main beneficiary given its close proximity with China, adequate infrastructure and strong government support for investors.

Vietnam has always been in the top 13 countries receiving FDI from the US, he stated.

Trinh Minh Anh, head of Office of the Inter-sectoral Steering Committee for Global Economic Integration, said after Covid-19, said Vietnam is not the only country looking to attract the investment capital from investors looking to exit China.

Moreover, as the Covid-19 pandemic has disrupted major global supply chains, it is essential for local enterprises to take advantage of a shift in value chains and ensure sustainable supply of input materials.