Impacts of the Covid-19 pandemic on companies in Vietnam
Companies in Vietnam have been severely affected by the pandemic. The level of impact varies depending on business line, product, service, business model, location, business size, cost structure and capital structure of companies.
- The hardest hit industries are transportation, tourism, hotels, restaurants, entertainment and similar services. Some operating in retails and education have enjoyed significant benefits while the majority are severely impacted.
- Manufacturing companies have had to reduce capacity or operational efficiency due to labor shortages, supply chain disruptions or costs incurred by the pandemic and strict epidemic prevention measures.
- Pharmaceutical companies, and companies providing services and products including medical equipment, medical consumables, essential food, e-commerce, fintech, delivery, distance training, distance entertainment, technology information and personal electronic equipment have benefited a lot.
- In the same industry and area of operation, SME enterprises are more severely affected than those with huge capital. On the other hand, small businesses are more flexible and can transform faster than large enterprises. Therefore, to some extent, it can be said that big businesses have better tolerance while small businesses evolve faster.
Despite being severely affected, Vietnam is still luckier than many other countries in the world and in the region. This is indicated quite clearly in the statistics on GDP growth and exports in the first 6 months of the year.
What will be the opportunities after the pandemic?
Although it has been through a lot of difficulties caused by Covid-19, Vietnam still has many opportunities to offer foreign investors, which will be even more attractive after the pandemic.
- Firstly, Vietnam has a large and young population. After the pandemic, people will be more familiar with digital life, which may help boost consumption. It should be noted that Vietnamese people normally spent a very small part of what they make every month, therefore, the attractiveness of this market will be huge in the medium term.
- Secondly, Vietnam’s economy has developed quite stably during the past 20 – 30 years, and there is still plenty of room for further development. Besides, during and after the pandemic, the structure of the economy will have a big transformation in a more positive direction to serve as a premise for long-term development.
- Thirdly, Vietnam is still a major exporting country, which means there will still be a lot of “momentum and capital” for development. The coverage and reputation of “Made in Vietnam” products are gradually becoming more obvious, so goods manufactured in Vietnam will have some advantages over those produced in some other countries, especially from the “unfriendly” countries in the past period.
Finally, Vietnam has experienced a lag of 18 months into the pandemic compared to other countries, thus successful products, services and business models after the pandemic in other countries can be brought into Vietnam to exploit for mutual benefits.
Tips for foreign investors in Vietnam:
It would be less risky and more efficient to invest in businesses with higher digital content. Traditional enterprises will gradually lose their competitive advantage. No matter what industry or sector you invest in, you should start with a local partnership. This will help you reduce a lot of costs and time.
There is on important aspect about the Vietnamize market, and most big investors got to know: Once you lose your market in Ho Chi Minh City, you may win anywhere in Vietnam. The southern market appears to be quite open for new products, services and suppliers.