Businesses grapple with inflation

Increasing input material prices and rising fuel costs and a foreign exchange rate adjustment have forced domestic businesses to lower their 2011 planned net incomes while struggling to maintain their existing market share.

At a meeting entitled: “Macroeconomic policies in 2011 and business solutions” held on Tuesday, business representatives expressed their concern that rising input expenses and production costs and the flooding of low-cost products from China would have an adverse effect.

In fact, many companies have lowered their planned earnings in comparison with previous years. Several enterprises have transferred their targets from profits to maintaining market share.

Representative from Rang Dong Light Source and Vacuum Flask Joint Stock Company Do Hai Trieu said the State should issue policies to support businesses producing high-productivity products. In the long-term, stricter regulations on technical barriers should be rolled out to prevent low-quality imports.

Pham Chi Lan, senior economist, said producers should review their production procedures and strategies and the market to make necessary adjustments, asserting that this was a long-term solution to help businesses overcome challenges.

She also said that manufacturers should also recognise general difficulties, and short- and long-term obstacles in order to restructure inside their businesses.

Le Xuan Nghia, deputy chairman of the National Financial Supervision Committee, said: “As the costs of input materials and fuel increased, the best way for businesses not to raise their finished product prices is to reduce output”.

He also said that producers should also shorten payment periods and cut long-term orders in order to avoid risks from foreign exchange fluctuations, adding that businesses should pick easy and low-cost plans first, while using high technology to save energy and reducing overhead costs.

Deputy General Director of Casumina Le Van Tri agreed with Nghia, saying that his company was using its capital and limiting bank loans.

Nguyen Xuan Qua, general director of Bao Ngoc Bakery Company, said one of the optimal solutions was to pick the best time to import materials, saying that his company imported materials before the Lunar New Year, when input material prices were much cheaper than now.

Qua also revealed that his company now was focusing on best-selling products and expanding markets to rural areas while reducing production of low-selling products.

He also said relevant agencies should increase essential commodities following a road-map in order to avoid panicking consumers.

General director of Dai Dong Tien Plastics Company Trinh Chi Cuong said that businesses should reduce expenditure and design new low cost products to help consumers save money. If a business increased product prices but had not raised both quantity and quality, it would fail.

Co-operation crucial

Enterprises should co-operate in order to overcome the challenges they face. Co-operation among businesses in supply chains, sectors and provinces is considered an urgent task.

Nghia said that co-operation among partners was an important way to help businesses guarantee their survival, while internal co-operation will create better opportunities for enterprises in the future.

However, he sounded a warning that businesses should avoid borrowing capital from banks due to high lending interest rates which, in turn, would add costs to finished products.

Ho Thi Kim Thoa, Deputy Minister of Industry and Trade said prices on both domestic and global markets had fluctuated in the first two months of the year.

Specifically, in January, the price of essential commodities saw an increase of 24.3 per cent and 4 per cent in the world market, compared with the same period last year and December 2010, respectively. In February, food prices experienced a rise of 34 per cent and 2.2 per cent in comparison with the same period last year and January.

Despite challenging situation, domestic production was still stable and well-supplied.

However, Viet Nam’s trade deficit was still high, with 80 per cent reserved for imported materials and machinery, Thoa said.

In an effort to stabilise the economy, the Government issued Resolution 11 and the Ministry of Industry and Trade (MoIT) had rolled out an action plan to guide the implementation of the resolution for every business. — VNS

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