New Business Support Measures. Will the Authorities Help Logistics Survive?
"Government help those who help themselves". It is under this motto that many companies are now building their business in connection with the epidemiological situation and the global crisis. Let's ask the first person if there is any support from the state today, and what support measures are needed for business.
Now, in Russia businesses that have suffered from restrictions imposed due to the virus will get a six-month grace period for paying all taxes (except VAT), credit payments, and rental payments for the use of not only state-owned but also commercial property. Unfortunately, such measures will not help everyone.
"Our business will not receive any assistance from the state. Our organization does not have loans. The office is owned, so there is no need to pay rent. We can only hope that the volume of deliveries will not decrease to such an extent that we will have to optimize the cost of employees," comments Denis Bobrakov, Head of ACEX representative office in Novorossiysk.
"In any case, the postponement of payments offered by the state is not a solution, since any postponement implies additional costs for its provision," said Andrey Smirnov, General Manager of ATL, ACEX in the Samara and Ulyanovsk regions.
Many companies are now balancing "on the edge" and hope that during April they will remove most of the restrictions, the exchange rate will stabilize, and it will be possible to continue working as usual. However, it is not necessary to believe in it very much, because, according to medical and biological experts, the peak of the epidemic in Russia is still coming.
Alexey Lipatov, Head of Multimodal Department, ACEX in Moscow, believes that the state can only support business with tax holidays or incentives. However, these measures are likely to be introduced for a very narrow list of companies.
Logistics is one of the areas most affected by coronavirus infection. The government is already considering a list of measures to extend a "helping hand" to freight forwarders.
"The state should help, first of all, importers. It should introduce low-interest loans or credit holidays, reduce duties on goods that are poorly produced in the Russian Federation, reduce the number of inspections by state services for the next year, reduce taxation," comments Denis Bobrakov.
Because of many manufacturers have suspended their activities, the turnover of logistics companies has also decreased.
Oleg Degtyarev, General Manager of RusTrans, ACEX in Moscow: "It is necessary to stimulate manufacturers. If they function and work normally, then we will, because we are directly dependent on them. In addition, today it is appropriate to introduce state guarantees for the company. For example, if a company regularly and timely paid taxes, the state could become a guarantor of this company to banks. It would help an executive get a loan for working capital or other needs. Now many companies can't take out a loan, they are refused by banks."
Nevertheless, not everything is so sad. There is a list of organizations whose continuous operations cannot be stopped. For example, partners of Agency of Customs Logistics are those who are professionally engaged in the production and wholesale of industrial goods. Most of them still meet all their obligations, and payments are on schedule. "We try to adapt our services to them. For example, if the implementation of international road transport is difficult due to the increase in its cost or obstacles to the passage of borders, we change the logistics to multi-modal and, while maintaining the same budget, ensure the delivery of complete cargo to the territory of Russia by sea," comments Andrey Smirnov.
The situation in Azerbaijan is no better than in Russia: unjustified price increases, clandestine sales and a large percentage of unemployed people, which is increasing every day.
Katya Krepkova, Operations Manager of AG Global logistics, ACEX in Baku: "There are attempts by the state to help citizens, but since there is no clear system and organization, there are no changes for the better."
The situation looks much better for the former Union countries and Russia's closest neighbors in Europe. For companies having trouble, the state has introduced some support measures. For example, salary compensation. The amount of compensation in Estonia is 70% of the average employee's salary (but not more than 1000 euros).
Alexander Kovalev, Customer Service Manager, ACEX in Tallinn: "The authorities ask companies to work from home whenever possible. Transportation is strongly affected by the closure of some factories in Europe, increasing rates on air transportation, which results in some deliveries being delayed. In this case, the state provides compensation. It is paid when the employer is in a situation that meets at least two of the three conditions:
- the turnover or income of the employer in the current month decreased by at least 30% compared to the turnover or income of the same month last year;
- the employer cannot give 30% of employees the agreed amount of work;
- the employer has reduced the salary of 30% of employees by at least 30% or up to the minimum wage.
The state also gives a postponement on tax payments, no penalties are charged. The list of measures is constantly updated."
The government of Latvia provides support for downtime in the amount of 75% of the salary, but no more than 700 euros per month, but few people can get it due to many conditions, such as reduced turnover, fair payment of taxes, filing of all returns, and more.
"Support for business in Latvia is provided by the state, but not everyone can pass the filter screen. Our company did not sit and wait. We used the existing worked-out options of "state support". We issued the dismissal of personnel to the maximum under the article, in which the staff immediately joined the stock exchange and began to receive unemployment benefits. This benefit implies that the staff receives 100% of the salary for the first 2 months, and then the percentage decreases every 2 months. In total, unemployment benefits in Latvia are paid for up to 8 months," comments Leonid Mukhin, General Manager of P. K. S., ACEX in Riga.
What about Asian countries? After all, the coronavirus pandemic has been raging there since January.
In China there have never been any special business support programs, and this case is no exception.
"Unfortunately, we did not feel any support from the state. The only thing is that the monthly payment for social insurance has been reduced. Tax payments also decreased slightly. As for our company, the coronavirus has greatly affected logistics; many flights have been canceled. Now we are launching a Charter business from China to Moscow and from China to the CIS countries," says Jack Zhao, Overseas Manager of Sky Chain Worldwide, ACEX in Beijing.
Vietnam has a 15-day quarantine, but the government allows some businesses to operate normally.
Cheryl– Nguyen Kim Uyen, Marketing Executive of DACO Logistics, ACEX in Ho Chi Minh city: "DACO Logistics did not feel any big losses. We work alternately from home and from our office to provide the most convenient process for clients. We just canceled personal meetings; the distance between employees must be at least 2 meters. All business activity is still maintained."
On the government side, Vietnam supports all costs of medical examination and quarantine related to Covid-19. Therefore, businesses in Vietnam have not been supported with losses in this period. The government support packages are being passed and will be announced soon. "Vietnam is trying to ensure the health of its citizens so that no one die because of Covid-19. It is a great effort of a developing country. Therefore, we do not expect much for them to support additional costs for businesses during this period. The expenses they have spent on citizens are already numerous," comments Cheryl-Nguyen Kim Uyen.
Air freight in Taiwan is still moving as usual only flight and space reduce. Sea freight also moving as usual rate and space are available from the ocean carrier all the time.
Stephen Lee, General Manager of ASE AIR SEA EXPRESS, ACEX in Taiwan: "At moment there is not much changes in our business, the only thing now is to confirm rate and space of each shipment with airline in advance. Local government in Taiwan are doing everything possible to support those affected business and their employee. If they needed assistance from the government on both financial and relief fund support. The support from local government really works during this critical moment of corona virus pandemic. Local government are providing all kind of the support: medical face masks are issued to local citizens, cash support is paid to travel agents, and a special loan to airlines and other business with support of reduced interest rate."
Thus, the crisis is developing not only in Russia, but also around the world. Alexey Lipatov thinks that 30-60% of companies will not be able to continue working and will have to start from scratch if they have the desire and start-up capital. Those who survive will grow faster than usual, since the surge in demand should be obvious after the quarantine.
"Now those companies that have invested in IT and bear lower costs for paying employees will win. The transition to e-commerce in our country was fast, and current events should speed it up several times. I am sure that most people will not appear in shopping centers and grocery stores for a long time after the quarantine is lifted, if retailers can establish high – quality e-Commerce for everyone," says Alexey Lipatov.
Today, in the new conditions, every company has a chance to improve electronic document management; analyze the cost of services provided and increase their efficiency, abandoning the usual, but outdated business practices.
Any crisis is a new opportunity.