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With New COVID-19 Battle, Vietnam's Middle-Class Dreams are Deferred

Travelers visit the night market on the Vietnamese island of Phu Quoc.(VOA News)
Travelers visit the night market on the Vietnamese island of Phu Quoc.(VOA News)

Before July, Vietnam’s entrepreneurs thought that the worst of the coronavirus pandemic was behind them and that the economy was well on its way to a recovery. With a fresh wave of virus cases, however, many businesses find themselves on the back foot again, putting the fast-growing nation’s dreams of achieving middle-income status at risk.

Businesses are closing down at the highest volume in years, according to the latest data from the Ministry of Planning and Investment. The number of businesses that suspended operations skyrocketed 42% from January to July, year on year, while the number of new businesses registered in that period dropped for the first time since 2015, by 5%. Data on new businesses is a vital indicator for Vietnam, a communist nation that encourages citizens to create small and medium-size businesses as one stepping stone toward its goal of graduating out of lower-middle-income status.

The Orient Commercial Joint Stock Bank (OCB) is among those lending to firms to stay afloat.

Economic ‘backbone’

“At this period of time, OCB aims to support small and medium enterprises because they are the backbone of Vietnam’s economy,” Nguyen Dinh Tung, the chief executive officer of the bank, said.

Bars, nightclubs and event spaces are among those hanging the “temporarily closed” signs back on their doors this month after Vietnam reported its first ever coronavirus death in late July. This time the lockdown is more limited than in April, when a wave of virus cases forced a national shutdown.

After that three-week shutdown, businesses were allowed to reopen and spring brought signs of life back to the cities. As no tourists were allowed to go into or out of Vietnam, citizens flocked to local beaches and resorts, and the tropical nation actually headed into July with more domestic flights planned than in July 2019. While others were still battling COVID-19 abroad, Vietnam was an oasis of optimism that restaurants, hotels, trade, and other sectors battered by the pandemic could bounce back.

Like New Zealand, South Korea

However, in a sign of the pandemic times, the holiday was short lived. Vietnam closed its economy, reopened, and then partially closed again in the face of an unpredictable disease. It is like nations from New Zealand to South Korea that seemed to stamp out COVID-19 early on but still had to contend with smaller outbreaks later.

Amid the economic downturn, national carrier Vietnam Airlines is now planning to cut wages in half, while seven other state owned enterprises, based in Ho Chi Minh City, this month reported losses in their financial statements for the first half of the year.

Women-led business

Small businesses in particular, though, have the least funds to get through the emergency. The World Bank’s International Finance Corporation is lending $40 million to OCB to get loans to these small enterprises, in addition to $100 million to the Vietnam Prosperity Joint Stock Commercial Bank. About one-fifth of that $100 million is earmarked for businesses owned by women, through a partnership with the Goldman Sachs 10,000 Women program.

Charlotte Keenan, the global head of the program, said it “is committed to building the capacity of local banks to mitigate against the disproportionately adverse impact of COVID-19 on women-led businesses.”