Electricity, petrol prices, exchange rate, Tsunami the problems of greatest interest

While enterprises are still feeling shocked with the dramatic increases of the prices of electricity, petrol and the dollar, they have been urged to consider the possible impacts of the earthquake and tsunami in Japan on their business.

The first seism

The “first seism” is the word that enterprises use to talk about the dramatic increases of the prices of electricity, petrol and dollar. The price increases which came in succession have dealt a staggering blow to enterprises, which now have to rack their brain to cut down expenses to make profits. A lot of businesses say “they have to lower the profit targets for 2011.” Others say “they dare not dream of making profit. They just wish to retain the market.”

Nguyen Khac Tung, Deputy Marketing Manager of Huu Nghi Confectionary Company in Hanoi said, “The latest sharp devaluation of the dong by 9.3 % has made us puzzled.”

“The dong depreciation and the input material price increases have forced us to raise the sale prices of our products. However, if so, we will face difficulties in selling products; because we have to compete with cheaper Chinese products,” said Do Hai Trieu, Head of the Technical and Marketing Division of Rang Dong Light Source & Vacuum Flask Joint Stock Company.

Trieu has urged management agencies to apply necessary policies in order to support businesses to carry out the projects on making high-efficiency products. In the long term, it is necessary to install strict technical barriers in order to prevent low quality foreign products from invading the Vietnamese market, which will harm consumers and kill local production.

Nguyen Van Qua, General Director of Bao Ngoc Sweet Company, complained that everything is getting more expensive, from electricity, to gas and petrol; which has forced Bao Ngoc to raise the sale prices, even though Bao Ngoc does not want to do this; because higher price may lead to lower purchasing power.

“It would be better if the decisions to raise prices are at different intervals, instead of being made at the same time, because the consecutive input material price increases will push the prices of finished products up,” Qua said. “The government should have allowed raising the petrol price three months before it allowed raising the electricity price.”

The second seism

While enterprises are still busy thinking about how to cut down expenses to reduce the production costs, they have been urged to consider possible impacts of the earthquake and tsunami in Japan on their business.

“The unpredictable changes after the earthquake and tsunami in Japan will certainly affect Vietnam. This is a burning issue now which businesses must not ignore,” said Pham Chi Lan, a well-known economist in Vietnam.

Japan is now the biggest ODA (official development assistance) provider to Vietnam, which provides 30 % of total ODA Vietnam can receive from foreign donors every year. Japan funded projects always have the highest disbursement rates. The projects also bring modern Japanese technologies to Vietnam.

Some forecasts have said that Japan will lack food after the natural calamities. What should Vietnamese enterprises do in such a context?

Lan has caught the business attention of two issues. The increasing food prices in the world could be the good opportunity for Vietnam, a big rice exporter. Also, Vietnam is facing challenges in climate change and the salting infiltration in Mekong Delta.

The domestic market will witness stiffer competition between Vietnamese and foreign manufacturers. By that time, Vietnam will have to fulfill its commitments on cutting taxes. The import tariffs on the Chinese imports will be cut to 0-5 %, which will make foreign goods cheaper on the domestic market.

However, Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council has given optimistic forecasts about the business environment. He said “the current high lending interest rates will begin going down in the third quarter. This will help ease the burden on businesses, and will also help the stock market recover.” – Vietnamnet

Tags: Electricity, exchange rate, petrol prices, Tsunami