Vietnamese Private Enterprises’ Covid-19 Donations: Not All about Altruism

Vietnam recorded an annualised GDP growth rate of 13.7 per cent in the third quarter of 2022. An important reason for this impressive growth lies in the low base of the third quarter of 2021 when the Vietnamese economy was affected by massive lockdowns to deal with the Covid-19 pandemic. The sterling growth also reflects Vietnam’s success in controlling the virus over the past 12 months, a feat to which private conglomerates have made significant contributions. It should be noted, however, that their intentions are not altogether altruistic.

Last year, Prime Minister Pham Minh Chinh noted that the business community was a “driving force” in the country’s management of the Covid-19 pandemic. His statement came as private conglomerates had been funnelling resources into state-led Covid-19 responses despite business difficulties they were facing.

For example, Vingroup, Vietnam’s biggest private conglomerate, last year provided funding for the Ministry of Health to conduct clinical trials of the home-grown Covivac vaccine and purchase four million vaccine doses and 33 million test kits. In total, Vingroup’s Covid-19 contributions reached nearly VND9,400 billion (US$396 million), which, according to the group, partly accounted for its first-ever loss of more than VND9,000 billion (US$388 million) in 2021.

Although other private enterprises could not match Vingroup’s level of assistance, their substantial and practical contributions remain noteworthy. Sovico Group, for example, gifted VND100 billion (US$4.3 million) worth of medical equipment, ambulances, ventilators and test kits to provinces across Vietnam. The firm also worked with the Ministry of Information and Communication to build a website for the national Covid-19 Vaccine Fund. This is a public fund set up last year to finance the country’s drive to secure 120 million doses of Covid-19 vaccines.

Property developer Van Thinh Phat, along with its subsidiaries and partner companies, donated a total of VND2,000 billion (US$84.3 million) for Covid-19 relief efforts. These include medical supplies and funds to support authorities to conduct contact tracing, a key measure behind Vietnam’s initial success in containing the virus.

Sun Group donated VND320 billion (US$13.5 million) to the national Covid-19 Vaccine Fund and contributed VND691 billion (US$ 29.1 million) in cash and in kind for Covid-19 prevention and control activities. Notably, the firm sponsored the construction of two field hospitals in Da Nang and Hai Duong and directly installed advanced medical equipment in some hospitals across the country.

Meanwhile, Long Thanh Golf, a subsidiary of KN Group which is well-known for major real estate projects, also reportedly donated VND500 billion (US$21 million) to the national Covid-19 Vaccine Fund.

These firms can be seen performing corporate social responsibility (CSR) — the idea that businesses should contribute to societal goals by engaging in or supporting volunteering or ethically-oriented practices. Since its introduction to Vietnam in the early 2000s, the concept has been increasingly embraced by Vietnamese firms. However, there are other reasons for these conglomerates to make generous Covid-19 donations.

… by assuming a pivotal role in national endeavours such as developing social housing projects and working with the government to control the coronavirus, private firms expect not only to receive future preferential treatment from the state but also avoid the risks of being criminalised, especially in light of their recent land violations.

First, since the reopening of the economy was conditioned upon a high-level of community immunity, businesses were motivated to fund and facilitate the national vaccination campaign. Second, they wanted to burnish their reputations to appeal to the public and foreign investors, ultimately increasing their profitability in the long run. Media coverage of their support for the government’s efforts to control the pandemic helps enhance their image as socially responsible firms, while diverting public attention away from their scandals and wrongdoings.

For example, Vingroup is known for acquiring land for some of its projects from state-owned enterprises or government agencies without going through a public bidding process. In 2021, the Government Inspectorate found multiple violations in a public land plot Van Thinh Phat had acquired in Ho Chi Minh City. KN Group, the developer of the massive KN Paradise project in Cam Ranh, Khanh Hoa Province, allegedly acquired 800 hectares of military-owned land without going through a public bidding process.

Moreover, some of these firms’ development projects have stoked controversy due to their impact on the environment. Since 2018, environmentalists have been protesting Sun Group’s construction of an ecotourist complex in Tam Dao National Park, highlighting its adverse impacts on local ecology and community. In 2020, Vingroup received approval to construct a US$9.3 billion real estate project in the coastal Can Gio District of Ho Chi Minh City. This is a source of frustration for experts and activists, who had warned for years of the project’s potential impact on the Mekong Delta and nearby Can Gio Biosphere Reserve.

Last but not least, by assuming a pivotal role in national endeavours such as developing social housing projects and working with the government to control the coronavirus, private firms may expect not only to receive future preferential treatment from the state but also avoid the risks of being criminalised, especially in light of their recent land violations. Indeed, since 2016, Vietnam’s high-profile anti-corruption campaign has mainly targeted corrupt government officials and senior managers at state-owned companies, while being lenient on private entrepreneurs, especially those having strong connections to top politicians and the authorities.

In relying on private conglomerates’ resources to advance its socio-economic goals, however, the Vietnamese government will further complicate its efforts to fight corruption. By granting political favours to local conglomerates as a reward for their generous donations or withholding sanctions against them for their unlawful business practices, the government will only help entrench corruption and cronyism. As the popular adage goes, there is no such thing as a free lunch. At the same time, private entrepreneurs should also learn the lesson from the arrest of the senior management of Van Thinh Phat last week on fraud charges related to the group’s corporate bonds. The episode shows that while political connections such as those secured through generous Covid-19 donations can help local tycoons build up their businesses faster, there are limitations to how much political favour they can get in return. If their violations are gross, no amount of political protection can shield them from the long arm of the law.

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