CPTPP and EVFTA will be motivation for businesses to recover post Covid-19

Dr. Lee Chang-Hee, Director of International Labor Organization in Vietnam (ILO).

Vietnam depends heavily on the international economy. Under the impact of the Covid-19 pandemic, do you think that Vietnam's economy and labor market will be affected more seriously than many other countries?

We do not have accurate and up-to-date data on Vietnam's trade. According to the World Trade Organization, global trade volume in 2020 is expected to decrease from 13% to 32%. The data reported on Vietnam's first quarter trade was not too bad, exports increased by 0.5%; imports decreased by 2% and attracted foreign direct investment of USD 8.55 billion. But by the end of April, we will see the overall impact of the Covid-19 pandemic on trade and investment more clearly.

There have been signs that the situation in the second quarter will be much worse, for example, there are no more foreign tourists coming to Vietnam,besides, the demand for Vietnamese goods on the export market plummeted because most of the trading partners are applying blockade measures.

This ongoing global health and economic crisis is serious, it affects both supply and demand. The wide-spread blockade measures heavily affected the supply side as many factories were temporarily shut down and on the demand side; consumers in the United States and Europe had to stay at home. The problem is that Vietnam is heavily dependent on global trade. So, we can say that both businesses and workers in Vietnam will feel much more clearly and deeply the effects of global trade.

Does this affect the integration strategy of Vietnam in the future?

The integration strategy of Vietnam in the future won’t be affected. In contrast, this strategy has proven to be the main engine of economic growth for Vietnam's success story. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Vietnam-EU free trade agreement will bring great opportunities, especially for the faster recovery after the Covid-19 pandemic.

But when planning post-Covid-19 development strategies, the Government may have to consider how global supply chains are more resilient and how to expand domesticconsumption markets, how to support domestic service industries and enhance the competitiveness of Vietnamese businesses towards greater flexibility and resilience.

What about domestic service sectors, domestic private businesses, family businesses and farm households not directly linked to global supply chains?

They not only played an extremely important role in the period of economic crisis due to Covid-19, when global demand for Vietnamese enterprises was seriously reduced because of the disruption of global supply chains, but also play an important role in the post-Covid-19 long-term growth model.

Together with the state sector, microenterprises, family businesses and farm households are the type of economy that has supported the Vietnamese economy in previous wars. They can provide temporary accommodation for workers who have lost their jobs and have to return to their home countries and villages. They are a traditional resource that makes society resilient, and unfortunately, they will once again have to play this traditional role during the peak of the crisis caused by Covid-19.

The problem here is that the scope and speed of the employment crisis caused by the Covid-19 pandemic can be much greater than the household and farmer's capacity to shoulder. The government needs targeted measures in various ways so that people can overcome the most difficult times of the crisis until the situation gradually returns to normal. Speaking of which, strict forms of "social gaps" may need to be gradually relaxed so that the economic activities of microenterprises and households can provide a source of life for people, for resistance and stability. Of course, it should be a "safe and healthy business" under clear instructions on how to apply social spacing in business activities. I think that the Vietnam Cooperative Union and the Vietnam Association of Small and Medium Enterprises play an important role in this through the network of cooperatives in urban and rural areas.

In the long run, a key strategic issue is the need to formalize informal businesses to expand domestic consumption base and support the domestic service sector. A country with nearly 100 million people needs to build intrinsic markets led by domestic businesses, which is one of the most effective strategies to help Vietnam's economy be resilientagainstexternal shocks. The formalization accompanied by various social protection measures will help Vietnamese society to be more resilient to similar global health crises that may occur in the future.