Enterprises going through tough period

Enterprises in Vietnam are going through a tough period as they are facing three mahor problems including capital shortages, surging material prices and stagnant demand.

Commonly, despite feasible projects and vigorous plans many are reluctant to expand operations and even narrow businesses down due to high-sky interest rates.

Ly Kim Chi, vice chairwoman of the HCM City Food and Foodstuff Association said that the majority of enterprises in food and foodstuff industry are small and medium-sized and some 80pct of the members have been thirsty for capital.

Consequently, domestic commodities such as instant noodles, confectionaries and candies have been losing competitive advantage over imports right in the home market. “Domestic businesses will stand the risk of losing market share to overseas ones if the existing situation continues for the next six months”, said Chi.

Tran Buu Long, deputy director of HCM City Credit Guarantee Funds revealed that its capital guarantee has reached nearly 300 billion dong, yet seldom have any new businesses approached such source of capital since the beginning of the year due to unaffordable interest rate of 20pct-21pct. Still, what concerns him most is SMEs who are in dire need of capital, yet without collateral, which made bank loans inaccessible to them.

Apart from interest rate hikes, enterprises in other fields particularly production sectors have encountered a great deal of trouble. Fisheries and seafood sector, for instance, is struggling for raw materials which are unstable and experiencing price fluctuations.

According to Trinh Ba Hoang, general director of Commercial and Fisheries Joint Stock Company (ICF), material prices have seen a rocketing year-on-year increase of 40pct-45pct. In addition, fixed dong exchange rate against US dollars has significantly weakened the competitive position compared with neighbouring nations of similar export structure.

A frozen seafood processing enterprise’s director revealed that their domestic selling prices have been raised due to input cost hikes, which appears hardly acceptable with supermarkets as well as customers leading to sharp decline in demand for the products.

According to the Vietnam Steel Association (VSA), the second quarter saw the steel stock of around 500 trillion tonnes whereas production was as little as 50 percent of the total capacity. Noteworthy, the monthly interest payment for such stocks is estimated to reach 150 billion dong. In the meantime, some 30pct of its members’ current technology are obsolete, the other 40pct medium and another 20pct modern. Thus, the current surging interest rates would impede further investment in technology as well as in plants.

Recently, the HCM City People’s Committee has brought forward the proposals for privileged policies facilitating enterprises’ approach to bank loans. In respect of banking operations, additional surveillance and investigation should be further strengthened so as to circumvent operational risks.

Source Intellasia | Nguoi Lao Dong

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs