VASEP has proposed several solutions to overcome difficulties and support production and business activities for seafood enterprises.

22 June, 2023

In response to the official letter No. 4367/BKHDT-TH dated June 11, 2023, from the Ministry of Planning and Investment, which proposes policies and solutions to overcome difficulties in production and business activities in the current situation, as well as the previous request from the Ministry’s leadership at the Conference on Overcoming Difficulties and Obstacles to Support Business Recovery in the last months of 2023 held on May 26, 2023, the Vietnam Association of Seafood Exporters and Producers (VASEP) issued a letter on June 14, 2023, numbered 59/CV-VASEP, summarizing the report and suggesting relevant solutions to overcome difficulties for the seafood industry in the current phase.

1. The interest rates and bank fees are excessively high.

– The bank interest rates are excessively high: Seafood enterprises, which mainly engage in exporting goods and often borrow in USD, have been facing an increase in interest rates since the third quarter of 2022. Many banks have announced and immediately implemented an increase in USD lending rates from 2.1-2.8% to 3-3.3%, and in some cases, even up to 4.5%. Currently, the majority of rates are at a high level of 4.1-4.9%, with some enterprises experiencing rates higher than 5%. This situation occurs amidst the decline in seafood production and exports.

– Another concerning issue is the “credit tightening” and restrictions on lending below the granted credit limit. New loans are only disbursed in correspondence with the repayment of previous debts.

– Bank fees: In addition to the already high interest rates mentioned above, there are various fees to consider, such as the transfer fee for incoming remittances from abroad (0.05%), Letter of Credit (L/C) payment fee (0.1%), document handling fee (10 USD), bill of lading fee (10 USD), and late payment acceptance fee for L/C (50 USD), among others.

– Imposing a cap on the deductible interest expense for calculating income tax is unreasonable, as it adversely affects business results and cash flow, especially during the initial investment years. While production enterprises are in need of capital support for investment and development, they are subjected to this limitation.

Capital, credit, and interest rates are currently the greatest pressures and sources of tension in the industry. The association hopes that the Government, Ministry of Finance, and State Bank of Vietnam will pay attention to this matter. Here are some key recommendations from the association regarding this issue:

– Adjust the interest rates for USD loans to below 4% and for VND loans to below 7% to support export-oriented seafood enterprises.

– Allow seafood enterprises to extend their loan repayment period by 4-6 months for loans due in the second and third quarters of 2023. Additionally, continue providing loans within the credit limit considering the decline in exports during the first half of the year. This will enable enterprises to stabilize their supply of raw materials from farmers and fishermen, as well as process and store products in preparation for future exports in the remaining quarters of 2023.

– Direct credit towards production and prioritize sectors such as seafood and high-tech agricultural enterprises. Create favorable conditions for seafood enterprises and high-tech agricultural enterprises to access credit in order to support their production and generate livelihoods for the entire agricultural supply chain.

– Revise Point d, Clause 2, Article 5 of Decree No. 132/2020/ND-CP to abolish the provision that considers long-term borrowing transactions between banks and investment-oriented enterprises as affiliated transactions. This revision would help enterprises avoid the limitation on deductible interest expenses when calculating corporate income tax.

2. The credit package of 10,000 billion Vietnamese dong is aimed at stimulating demand and supporting seafood enterprises in purchasing aquaculture inputs from farmers.

The association recommends that the State Bank of Vietnam continue to show interest and consider implementing a stimulus package of 10,000 billion Vietnamese dong for the aquaculture sector in the Mekong Delta region. This stimulus package is specifically targeted towards export-oriented enterprises that will purchase and stockpile aquaculture inputs for export in the next 3-6 months in 2023 and the first quarter of 2024, in response to the current situation of limited export orders. Implementing the stimulus package early will provide reassurance to aquaculture farmers, encouraging them to continue their farming activities instead of suspending operations during the present period.

3. Solutions to reduce business costs through tax policies, fees, social insurance contributions, and the timing of social insurance contributions:

After the Covid-19 pandemic, many input costs continue to rise and remain at high levels, resulting in increased production and business expenses. Meanwhile, the selling prices of many key seafood products have not increased significantly, and businesses are also facing downward price pressure from customers. This situation has negative repercussions on farmers, fishermen, and seafood processing and export factories. Therefore, it is crucial to receive support from the government through tax policies, fees, and social insurance contribution rates to reduce operational costs and input expenses for enterprises.

Here are some key recommendations from the Association regarding this issue:

– Regarding tax policies: The Ministry of Finance is advised to expedite the value-added tax (VAT) refund process for exported goods and services. Additionally, extend tax exemptions, reductions, and deferrals, as well as exemptions and reductions on various fees until the end of 2023.

– Regarding mandatory contributions by businesses for employees: Recommend reducing the contribution rate to the unemployment insurance fund for businesses until the end of 2023. Consider amending and proposing a reduction in the health insurance contribution rate from 1% to 0.5% and temporarily suspending contributions to the occupational accident and disease fund until the end of 2023. Decrease the trade union fee contribution rate from 2% to a maximum of 1% of the salary fund as the basis for social insurance contributions. Recommend allowing businesses to defer social insurance contributions for 3-6 months during the current challenging period.

The government and the Ministry of Finance are considering reducing the import tax on dried soybeans from 2% to 0% to support the aquaculture and livestock sectors in Vietnam.

Proposal to Vietnam Social Security: Extend the deadline for mandatory social insurance contributions to the “last day of the month” – the current regulation of Vietnam Social Security is putting significant pressure on labor and salary management at the end of the month for enterprises employing a large number of workers, resulting in increased workload for reconciling and adjusting social insurance contributions in subsequent periods (after enterprises have calculated and paid wages to employees).

4. There are other related solutions to reduce costs and support production, export-import activities, maintain supply chains, and employment:

Currently, businesses are facing challenges related to labor issues, such as a significant decrease in orders, high inventory levels, and financial pressure, which often lead to the need for downsizing operations, reducing working hours, and layoffs.

Businesses are currently facing challenges due to rising costs: including raw materials, interest rates, logistics, electricity, packaging, and labor expenses. Additionally, there are issues with permitting and guidance procedures for installing rooftop solar power systems for production purposes (processing, shrimp-fish farming) without grid connection.

Here are some key recommendations from the Association regarding these issues: the government should continue directing social policy banks to provide loans to businesses for paying suspended wages to employees, thus avoiding layoffs.

The implementation of a 2% reduction in value-added tax (VAT) is highly anticipated by the business community. It is suggested to expand the scope of this reduction to include all goods and services subject to a 10% VAT rate, without any exclusions.

– Permitting and guiding procedures should be established to allow seafood businesses to install rooftop solar power systems without grid connection (Zero export) for their production purposes (processing, shrimp-fish farming).

5. The obstacles in fire prevention and firefighting regulations.

Currently, the government is implementing new standards for the approval and acceptance of fire prevention and firefighting systems in businesses. These regulations do not classify the fire safety requirements based on risk levels, nor do they differentiate based on the scale and operational functions of each facility. The conditions imposed are excessively stringent and result in excessively high costs for businesses. Some provisions impose impractical and unfeasible requirements in practice.

The Association proposes that the government assign the Ministry of Public Security to lead and coordinate with relevant ministries, departments, and localities to promptly study and propose solutions in the following directions:

– Review and revise the regulations on fire prevention and firefighting to classify the level of fire safety risks for production and business activities. Apply fire safety conditions based on the risk level and minimize unnecessary costs for businesses.

– For existing factories that were planned and constructed without fulfilling the required fire prevention and firefighting facilities, such as fire reservoirs or automatic fire alarm systems in cold storage warehouses, it is necessary to consider their suitability and establish a timeline for compliance to facilitate the operations of businesses and address the deficiencies.

– For units that have already obtained approval and acceptance of their fire prevention and firefighting systems under the previous standards, extend the minimum operational period by 2-3 years to allow businesses sufficient time and resources to upgrade, repair, and replace their fire prevention and firefighting systems to meet the requirements of the law.

6. The challenges in investment procedures and the construction licensing process for existing projects of businesses.

Regarding this issue, the Association recommends simplifying procedures (Article 41: Adjusting investment projects, Law on Investment (amended) issued on June 17, 2020) for the investment project of seafood processing plants that have been previously granted an investment certificate and are currently operating, with the intention to expand capacity/upgrade technology (without requiring additional land allocation/leasing).

Letter No. 59/CV-VASEP dated June 14, 2023.