Business slows as credit squeeze continues

Businesses should try to save on production costs to cope with rising inflation and other economic difficulties, several economists said at a seminar in HCM City on Tuesday.

Le Xuan Ba, head of the Central Institute for Economic Management, said the Government’s policies on inflation and credit tightening were seriously affecting businesses.

Commercial banks have tightened credit, with 60-70 per cent of credit usually loaned for business production.

Despite current high-interest loans, businesses are still taking out loans while waiting for the market to recover.

Vissan Co said businesses were not expanding production now because of the lack of capital, fluctuating currency values and high risks.

“Maintaining a certain level of production and refusing to sign long-tem contracts are among the measures that businesses have implemented to cope with challenges,” Vissan’s representative said.

Vissan has negotiated with suppliers to lower input costs and ensure that selling prices are not too high.

Experts also said that companies should improve their trademarks.

A representative of Tinh Hoa Toan Cau 3 Co said businesses should conduct more market research to meet customer demand and tastes.

To increase turnover, they also should improve sale skills, selling processes and sales training.

Currently, manufacturers are suffering the impact of higher input costs, while retailers are influenced by the increase in service prices and transportation fees.

Dinh Thi My Loan, deputy chair and secretary general of the Viet Nam Retailers’
Association, said the supermarket systems and retail trade centres had currently faced obstacles as consumers were curtailing their spending.

Loan noted that for the retail sector, businesses should not expand the market at this time despite of good business performance.

In the past, retailers offered many promotional programmes to attract customers and tried to negotiate with suppliers to keep the price stable to deal with economic difficulties.

The retailers should re-evaluate the market, their competitors and closely manage price policy in purchasing goods, she said.

Economists said businesses should take this time to restructure, conduct market research and map out strategies for their development in the next one to two years.

Moreover, businesses need to pay more attention to human resource development and modern technology investment.

Good business plans would help them mobilise capital sources more easily, economists said.

Han Manh Tien, chairman of the Viet Nam Association of Corporate Directors, said economic difficulties this year compared to 2009 were even more serious and would continue until the end of 2012.

With that scenario, it is necessary that businesses draw up specific long-term development strategies so that they can develop in a sustainable manner. — VNS

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial