SMEs at risk of bankruptcy due to economic meltdown

“The profit margin in the first half of the year was measly 5 percent, while the inflation in the first half soared to nearly 14 percent. I suffer heavy losses,” says director of a Ho Chi Minh City-based textile enterprise.

The director, who has 3,300 employees and 80 outlets, considers turning her factory with a large area of thousands of square meters into an apartment building.

“The company is struggling with high lending interest rate and increasing input costs. Sometimes I had to borrow money from loan sharks with the lending rate of 9 percent per month to pay employee salary,” she says.

The outlets located in downtown of the city incurred big losses as the retail space rental increased sharply to US$3,000-5,000 per month, she discloses.

“We consider either reducing operation or switching to other kinds of business,” she says.

Hong, director of a textile material supplier, says the firm has been at risk of bankruptcy since fiber price slumped 40 percent this year.

Some local enterprises have to narrow down their distribution network and canceled their business plans due to the economic turmoil.

The footwear manufacturer Asia has shut down their only one showroom in HCMC’s District 10. Officials from the company disclose they cannot cover the showroom’s rent of tens of millions per month.

Trung, director of a small textile firm in Tan Binh District, worries that inflation will be worsen on the surging gold price.

“Material costs always moved up on the increasing gold price in the last three years,” he notices.

His firm has borrowed nearly VND300 million ($15,000) to cover the losses, which was caused by a slowdown business.

Sales at retail markets and supermarkets plunged by 20-40 percent year-on-year, he says, adding he has to lay off four out of 16 employees this year.

Vietnam gold price jumped to an all-time high of VND40.15 million a tael (1.2 ounces) on July 30 as global price surged to record on demand for an investment haven amid mounting concerns on the US debt impasse and signs of a faltering economy.

The Ministry of Industry and Trade expects the economy will continue to cope with more challenges in the second half, including high inflation, wide trade gap and slow growth rate.

Vietnam’s growth is expected to slow to 6.1 percent this year as authorities tighten monetary policies and cut government expenditures to bring inflation under control, the Asian Development Bank said Thursday.

The economy expanded 5.7 percent in the second quarter of 2011, compared to 5.4 percent in the first quarter, supported by increased industrial and construction output.

However, growth has moderated from last year’s 6.8 percent as monetary and fiscal policies were tightened to cool the economy, according to the July edition of ADB’s Asia Economic Monitor report.

Source: SGTT/SGGP

Tags: , ,

Posted by VBN on Aug 2 2011. Filed under Enterprises. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

You must be logged in to post a comment Login

Stay informed everyday

Subscribe to free RSS and email updates from Vietnam Business News

Subscribe via Email Subscribe in a Reader Follow us on Twitter Connect on Facebook

RSS Singapore Business News

  • PLife Reit’s Q3 revenue hits S$22m
  • Roxy-Pacific’s net profit jumps 50%
  • Works to start soon on Tuas MRT station
  • Punggol condo site attracts 5 bids
  • SGX suspends membership of MF Global S’pore
  • SIA reports 49% fall in Q2 net profit

RSS India Business News

  • Retailers predict sales slowdown in coming quarters
  • Bulk drug exports excluded from bar coding
  • Diesel, LPG prices set to rise again
  • Higher sales in chronic segments boost revenue
  • New drug pricing policy to pinch top three firms
  • Sensex up over 180 points; Sterlite, Hindalco, Axis Bank gain

RSS Malaysia Business News

  • Malaysian Marine rises on RM1.4b job
  • Yeo Hiap Seng climbs on Q3 profit jump
  • CSC Steel suffers Q3 pre-tax loss of RM1.98m
  • Nestle posts higher Q3 pre-tax profit
  • OSK maintains ‘neutral’ call on steel stocks
  • Malaysia’s exports rise 16.6pc, beats forecast

Sponsored

  • Looking for an overseas forex broker?
  • Trading Point now offering Forex Malaysia and FX Japan with Forex, CFD's and Futures.