Inflation ‘a chance to restructure enterprises’

Economic experts and company directors discussed the development of the domestic economy, the impacts of Government policies and plans for the next six months at a seminar held here yesterday by the Viet Nam Association of Corporate Directors.
Attendants agreed that soaring prices had pushed up input costs and decreased revenues and competitiveness, but also created an opportunity for companies to restructure into a more efficient model.
Nguyen Thanh Hoan, general director of construction company Vinavico Joint Stock Co, said high inflation was holding back the development of the economy and had forced many companies to the edge of bankruptcy.
“With soaring inflation, the most effective solution is to increase business efficiency. To succeed, operational practices need to be comprehensively checked,” Hoan said.
He also explained Vinavico’s own restructuring process, with a change of thinking and management leading to a change of focus away from capital towards knowledge. This was partnered by a comprehensive business restructure in order to reduce costs and raise productivity and efficiency.
Do Hong Khanh, chairman of Bach Dang Construction Co and Ba Vi Poultry-Farming Co, said poor business performances could force companies to cut workers, negatively affecting society.
Khanh also agreed companies needed to reduce business costs, raise efficiency and diversify capital sources.
Meanwhile, Viet Nam Retailers Association’s general secretary cum vice chairman Dinh Thi My Loan said retailers needed to assess the impacts of inflation from the angle of retailers and build suitable strategies accordingly.
Le Xuan Ba, director of the Central Institute for Economic Management, addressed the seminar, saying that the tightening of fiscal and monetary policies, as well as reduced public investment – part of Government measures to curb inflation – had caused difficulties for many enterprises.
“It is hard for companies to access bank loans, and costly capital makes business less profitable,” Ba said.
He added that the drop in public spending had also driven many provincial construction and assembly companies to the brink, with state and state-owned enterprises forced to postpone numerous projects.
According to Ba, in the first four months, the Government succeeded in cutting public spending by more than VND96.88 trillion (US$4.72 trillion), equivalent to 10 per cent of the nation’s total social investment last year.
He suggested the direction of policy change should be clear and predictable, so enterprises could actively prepare pertinent business plans.
Ba said the Government should apply a flexible cap on credit growth, following which banks should focus on the manufacturing sector which should be given higher credit ratings.
Ba also said rising inflation was fundamentally attributable to the inner weakness of the country’s economy – an old economic structure which was heavily reliant on the exploitation of natural resources, outsourcing, outdated technology and low labour productivity – and suggested modernising the economic structure towards developing in-depth and increased efficiency.
Head of Economic Development Department of the Ha Noi Institute for Socio-Economic Development Studies Nguyen Minh Phong said Viet Nam’s economy would improve in the second half this year but challenges remained.
Phong said the pressure of inflation would continue to linger, and inflation for the year could double the target set by the Government.
“The fact that electricity prices are going to be allowed to change every three months from June 1, instead of being fixed for the year, is a great risk for enterprises and the whole of society,” Phong said.
He also stressed the pressures of high borrowing rates on the banking sector, small-and medium-sized companies, and the real estate and stock markets. — VNS

Tags: Vietnam 2011 inflation, Vietnam economic, Vietnam economy, Vietnam inflation

Posted by VBN on May 21 2011. Filed under Economy News, Enterprises. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry