Solutions to support tourism enterprises in Da Nang due to the impacts of the COVID-19 pandemic

The Golden Bridge in Da Nang

With a total natural area of 128,488 hectares and a population of about 1,134,310 people (according to the Population and Housing Census, 2019), Da Nang is the fourth largest city in Vietnam. It is located in the middle of three world cultural heritage sites: Hue, ancient capital; Hoi An, ancient town; and My Son Sanctuary. Located under the key sea and international air routes, Da Nang has a favorable geographical position for socio-economic development, especially tourism development. The city is one of twelve tourism cities of the country, positioning itself to become a beach tourism city, a tourism center combining meetings, incentives, conferencing, exhibitions (MICE), and was voted “the most livable city in Vietnam”.

1. Impacts of the COVID-19 pandemic on Da Nang’s tourism industry

Since the beginning of 2020, the COVID-19 pandemic has evolved quickly, creating complications, and negatively affecting the growth rate of tourism and the socio-economic development of the city. After Government permission to restore domestic tourism, the Department of Tourism and the City Tourism Association implemented a tourism demand stimulus programtitled “Da Nang Thank You 2020”, which initially achieved positive results. At the same time, an event, “Fantastic Da Nang” was carried out creating an attractive highlight for tourists, and creating momentum to promote the recovery of the tourism industry.

However, the second outbreak of COVID-19 during the peak of summer tourism in Da Nang in 2020 led to the suspension of all tourism activities in the city, causing serious damage to tourism businesses and services, specifically as follows:

Regarding the operation of tourism businesses. Implementing Directive 16 of the Prime Minister and the Municipal People’s Committee’s direction on pandemic prevention, from July 28, 2020, all tourism businesses including 398 travel businesses, 16 tourist sites, 955 of 1080 accommodations, 350 transportation units, and 27 tourist boats were required to suspend their operations. In addition, 38 hotels and 87 tourist facilities with accommodations for long-term and business guests were used to serve doctors and foreigners in pandemic prevention. Due to business difficulties, there is an increasing trend in purchasing, selling, and transferring resort real estate, hotels, and apartments. According to preliminary information, there are about 250-260 hotels, apartments, and villas for sale, accounting for 24.7% of total hotels.

Regarding the damage to businesses. In 2020, the city welcomed about 2.7 million visitors, a decrease of 68.6% over the same period in 2019, in which, international visitors are estimated at more than 686,000 arrivals, down 80.5% compared to 2019. Domestic tourists were estimated at more than 2.03 million, a decrease of 60.6% compared to 2019. The total tourism revenue was estimated at about 10 trillion VND, a decrease of 65.1% compared to 2019. Tourism businesses and services operated moderately and needed to reduce staff or give employees long-term leave. Some businesses had to stop work altogether. It is expected that by the end of 2020, the total damage to the city tourism revenue will be about 26 trillion VND, of which about 6.59 billion VND is total and direct damage to travel businesses, about 4.8 billion VND in tourist accommodation, about 5.18 billion VND in tourism transportation enterprises, and about 8.27 billion VND at tourist sites.

Regarding the affected labor situation. With the pandemic outbreak from the end of July, 2020 in Da Nang, the total number of employees who had to stop working and quit their jobs from the beginning of August, 2020 was estimated at 31,874 people, accounting for 62.5% of the total number of employees(1). At travel enterprises, the number of employees who temporarily stopped working or quit their jobs was about 1,800 out of 1,848, accounting for 97.8% of the total. In travel transport enterprises, the number of laid off workers was about 2,599 out of 3,042, accounting for 85.4% of transport workers. In tourist accommodations, the number of furloughed workers was about 25,983 people, corresponding to 93% when compared to the end of 2019. While state-owned tourist resorts maintained 100% of their staff, private tourist resorts and sites only allocated 40% of employees to work alternately for maintenance and cleaning, resulting in 60% of employees on temporary leaves. 4,578 tour guides (3,381 international and 1,197 domestic guides) are unemployed, with many switching to other careers. Currently, most tourism businesses only maintain a partial number of staff to handle contracts, refunds, tour cancellations, and related procedures as well as driving assistance for doctors, medical staff, and patients. In general, tourist accommodations mainly maintain a few key staff and managers.

2. Solutions to support tourism businesses in Da Nang

Facing the impact of the COVID-19 pandemic on the social economy in general and the tourism industry in particular, the city has implemented the following solutions to support businesses:

- Implementation of the Government’s Resolution No. 42/NQ-CP dated April 9, 2020, and Decision No. 15/QD-TTg dated April 24, 2020, of the Prime Minister stipulating support for people facing difficulties due to the COVID-19 pandemic. There are 7 tourism businesses in the city that have been approved for a budget to employers of more than 1 million VND per employee who must postpone labor contracts or unpaid work. The Ba Na Cable Car Service Joint Stock Company with more than 500 employees received nearly 1 billion VND. In addition, other tourist sites and destinations (Nui Than Tai Hot Spring Park, Hoa Phu Thanh Tourist Area, and others) have carried out the procedure to request benefits for workers. At the same time they received a reduced electricity bill from April to June 2020.

On May 5, 2020, the Da Nang Department of Tourism sent a document to the Department of Labor, Invalids, and Social Affairs to request guidance and support for 322 tour guides of the Association of Central Tour Guides who were working in Da Nang and lost their jobs. Through information from the Da Nang Tourist Guides Association, 19 out of 322 guides received support for the first phase. Some localities (Hoa Thuan tay, Hai Chau District; Hoa Chau commune, and Hoa Vang district) did not receive support for the tour guides because the criteria for the beneficiaries were not met.

- Circular No.35/2020/TT-BTC dated May 5, 2020, of the Ministry of Finance regulating a reduction by 50% of prescribed fees for the application dossier for an international travel business license, domestic travel business license, or tour guide card from May 5 to December 31, 2020. Currently, the Department of Tourism has applied exemptions for 6 businesses applying for a domestic travel business license. 360 tour guides received assistance to pay the fee for changing their tour guide cards.

- Official Letter No. 2698/BCT-DTDL dated April 16, 2020, of the Ministry of Industry and Trade on reducing electricity prices and bills for electricity users affected by COVID-19, applied from April to June 2020. The Department of Tourism has provided and confirmed the list of tourist accommodation facilities for Da Nang Power Company Limited and local electricity. The total amount reduced until June 2020 was nearly 10 billion VND (43% from the previous period) for about 1,000 tourist accommodations.

- Da Nang Municipal People’s Council promulgates Resolution No.293/2020/NQ-HDND on exemption or reduction of entrance fees at Ngu Hanh Son, Da Nang Fine Arts Museum, Da Nang Museum, and Museum of Cham Sculpture for 3 months. The above tourist attractions have waved entrance fees from June 1, 2020 according to the Resolution of the People’s Council, which serves about 28,000 visitors.

- Circular 01/2020/TT-NHNN dated March 13, 2020, of the State Bank, regulating credit institutions and banks to restructure repayment terms; exempt or reduce interest and fees, and maintain the current debt tiers to support customers affected by the COVID-19 pandemic. Commercial banks depend on each unit’s policy to take measures to support tourism businesses in line with the new reality.

- Official Letter No.860/BHXH-BT dated March 17, 2020, of Vietnam Social Insurance on suspending fees of the retirement and mortal funds for people affected by COVID-19 pandemic from the end of June 2020 to December 2020. No interest is charged for late payment. According to the Tourism Association, some tourism businesses have support with policies of social insurance, but still have difficulty meeting the conditions and criteria, leading to ineligibility for payment of the policy.

- Resolution No.84/NQ-CP dated May 29, 2020, of the Government stipulating a reduction of 15% of payable land rent in 2020 for enterprises that are directly leased land by the State according to the decision or contract of liable state agencies in the form of annual land rental payment, that must suspend business for 15 days or more due to the impact ofthe COVID-19 pandemic. Currently, the Municipal People’s Committee policy is directing the functional departments to advise the implementation of the resolution.

- Decree No.41/2020/ND-CP dated April 8, 2020, of the Government on extending the time limit for paying taxes and land rent, as applicable to entities engaged in tourism business such as travel agents and services, accommodations, restaurants, museums, arts, sports, and entertainment as well as Official Letter No. 897/TCT-QLN dated March 3, 2020, of the General Department of Taxation on an extension of tax payment due and exemption of late payment interest due to the impact of the COVID-19 pandemic. The tax payment extension period must not exceed 2 years from the date of expiration of the tax payment deadline. The City Tax Department has implemented the policy for more than 8,000 businesses in the city, including more than 3,500 businesses and organizations, and more than 4,800 individual business households.

3. Issues in the process of implementing policy and solutions to support businesses due to the impacts of the COVID-19 pandemic

a) Issues in implementing supporting policies

Difficulties in accessing support policies for unemployed workers. Beneficiaries are persons working under labor contracts, working contracts, and self-employed workers who lost their jobs. The policy only applies to people unemployed since April, 2020; however, many workers were unemployed before April, 2020. Some businesses suspended operations, let their employees take leave but still maintained payment of their social insurance to retain these employees, so that when the employees request unemployment support, they qualify for support criteria. In addition, the maximum level of unemployment support for workers is 3 months. However, due to the prolonged pandemic, workers still endure difficulties after 3 months due to unemployment and no income, especially workers with difficult circumstances such as having children under 3 years old.

Difficulties in policies to support businesses. The prolonged pandemic has caused disruption to business operations, resulting in no profits to pay taxes. A majority of tourism accommodation establishments have paid corporate income tax for the year 2019, but the first quarter of 2020 has not been paid to date. Because there is no revenue during the pandemic, the amount of deferred tax is not significant, therefore, the financial numbers are insignificant. A number of businesses requested to extend social insurance and insurance exemptions in difficult times but encountered obstacles in meeting beneficiary criteria in the process of implementing Government procedures. Currently, the electricity price reduction policy has expired. It originally applied from April to June, 2020. Though tourism accommodation establishments, resorts, and tourist attractions have suspended operation they have no revenue. They must still operate some essential systems to maintain their facilities, and thus encounter difficulty when making timely payments on their electricity bills. When seeking access to the financial support package they encounter other obstacles due to complex procedures with requirements of audit reports, damage assessment, and proof of liquidity. The State Bank has directed commercial banks to support businesses to restructure debt repayment, with incentives such as loan interest exemption and reduction, however, for businesses seeking assistance from the loan package of 16 trillion VND to pay salaries, the interest rate is not significantly reduced.

b) Solutions to support businesses due to the impact of the COVID-19 pandemic

First, promote pandemic prevention and control. The Government must distribute information and guidelines in the implementation of the Government and Municipal People’s Committee directives in the implementation of regulations on prevention and control of the COVID-19 pandemic. In addition, the Government must develop, disseminate and provide the education and resources needed to prevent and combat pandemic infection to businesses and service establishments. In this way, they will be prepared when the Government permits the resumption of international flights and tourism activity.

Second, support employees in the tourism industry. The functional agencies need to support local enterprises to solve problems relating to the procedures, and create favorable conditions for employees at tourism enterprises to enjoy supportive policies. This includes allowing tourist businesses and qualified tour guides, those that have obtained a certificate of unemployment or resignation from the Tour Guide Association, to have a fast track to Government support programs. There must also be a clear path to supplement the support policy for employees after the expiration of the 3-month unemployment insurance period, which has been extended by the long-term effects of the second wave of the COVID-19 pandemic. This includes the support policy for employees with children under 3 years old. Additionally it must consider and issue a package to support unemployed workers in tourism businesses. And finally it must expand benefits to other freelance jobs in the tourism industry, such as restaurant staff.

Third, solutions to support tourism businesses. The Tourism Association and its member associations need to support tourism businesses and services to verify and issue service refunds and cancellations of airline tickets, hotels, transportation, and restaurants due to the impact of the disease, ensuring the integration of bilateral benefits. Businesses should promptly coordinate with the Department of Tourism and Government authorities if any dispute occurs.

For people facing difficulties, the Government’s ministries and agencies need to streamline the application, procedures, and timeline for people to receive aid from support policies designed to offset the consequences of the COVID-19 pandemic. These policies include timely extension of tax payment, exemption of late payment interest, a revised policy of reducing land rents in 2020 for enterprises directly leasing land from the State, deadline extension of the tax and rent payment due for business entities in the tourism industry.

The Government proposes to extend the length of time for supporting electricity and water price reduction to include the first 6 months of 2021 with the intent to support tourism businesses, especially tourist accommodation establishments ensuring the ability to operate the essential systems, maintain the quality of infrastructure, and support businesses to restore operations after the COVID-19 pandemic. In addition it should continue delaying payment of premiums for social insurance and other compulsory insurance until the end of June 2021.Other stimuli include reducing the corporate income tax and VAT for tourism businesses by 50% through the end of June 2021; reduce environmental premiums for tourism businesses, and finally reduce the flat tax for individual business households in 2021.

Non-governmental stimuli include simplifying procedures for receiving support aids at banks to exempt or reduce interest rates on conditional loans and extend the short-term installment payment of short-term debts for businesses and individuals, ensuring that businesses can maintain their operations and avoid bankruptcy. Additionally, stimuli should include exemption or reduction of transportation fees for tourist transport vehicles through the end of June 2021; exemption and reduction of periodic registration fees, tolls and other related fees for tourist transport vehicles, reduction by 30-50% of land use tax and land rental for hotels and resorts in 2020 and 2021, and finally extending the deadline for paying outstanding land rent from 2020 until the end of 2021.

The Ministry of Culture, Sports and Tourism should propose to co-ordinate with the Ministry of Finance to allow enterprises to withdraw 80% of the registration deposit of travel business (up to December 2021) to support business maintenance. And the Ministry should consider issuing guidelines on submitting an application for deposit refund immediately after revoking a travel business license from September, 2020 to the end of June, 2021 to support business termination.

There should be an endorsement of policies on free visits to tourist sites and spots as well as 100% exemption from advertising fees for banners and advertising on products, services, and activities of tourism enterprises in Da Nang for up to 6 months after the Government allows the resumption of tourism operation.

And finally, the Government should advise the Municipal People’s Committee to arrange funding for training of skills for human resources in the tourism industry, including organization of free training courses to support businesses in professional, post-pandemic response strategies, organizing seminars about tourism servicepromotion.

Fourth, solutions to restore tourism activities. There should be a plan to restore tourism activities after the COVID-19 pandemic, including creating organizational orientation and tourism business processes in a new global situation to ensure both prevention of epidemics and business rehabilitation. Implementation of a Da Nang tourism stimulus program in 2021 restoring business activities, re-establishing tourist markets, and focusing on attracting domestic tourists would all contribute to the rehabilitation and future growth of Da Nang. The Municipal People’s Committee should consider, host, or organize major national and international festivals, events and conferences in 2021 to promote tourism. And they can support tourism businesses to advertise on the communication channels of the Department of Tourism, coordinating tourism businesses to participate in trade promotion, investment, with diplomatic activities to promote domestic and foreign tourism thereby promoting domestic and international tourism cooperation.

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Endnote:

1. Da Nang Department of Tourism: Report on the operation of the tourist business affected by Covid-19 and solutions to support business, Da Nang, 2020.

ASSOC. PROF., DR. LE VAN DINH

Academy of Politics - Region III