Craft Villages yet Gain Access to Demand Stimulus Package

According to a recent survey by the Vietnam Craft Village Association in many provinces across the country, although enterprises in craft villages nationwide are waiting for a 4-percent interest rate subsidy for bank loans - part of the Government's economic stimulus package, only between 10 percent and 15 percent of them have to date gained access to this capital source.

Enterprises in craft villages across Vietnam are currently facing a lot of difficulties and challenges, said Vu Quoc Tuan, Chairman of the Vietnam Craft Village Association. Since the beginning of 2009, thousands of enterprises have suffered full of hardships, many of them even have come into bankruptcy due to the global economic recession causing unemployment of millions of labourers.

 

Vietnam now has 2,790 craft villages with 53 different kinds of job and 12 million labourers throughout the nation. It is estimated to have nearly 200 different types of handicraft products for export, reaping around US$700 million annually. However, so far, as many as over 10 craft villages, two enterprises and 2,166 production households have gone into bankruptcy; 124 craft villages and 468 enterprises have produced perfunctorily. Over 80 percent of small- and medium-sized enterprises making traditional handicraft products are facing the shortage of capital, technique, and production equipment.

 

The biggest difficulty for craft villages is the outlet. As many as 40 percent of revenue of handicraft enterprises depends on export, Tuan said. Vietnam’s exports dropped 10 percent on year in the first half of 2009. Most handicraft products of handicraft enterprises ranked in the list of goods having decreased export value. Together with this, the rise in material prices pushed up prices of handicraft products, impacting on the purchasing power of the market. One more difficulty that handicraft enterprises must suffer is the narrowness of traditional output markets and the difficulties in exploiting new output markets.

 

One more difficulty is that most of handicraft products have not yet positions in the domestic market. Many handicraft enterprises have not seen the strong domestic consumption power for a long time, not domestic consumers turn their backs on local goods. Experience shows that it is necessary to change the way to distribute goods in rural areas. Handicraft products, brocatelle, silk, and silver engraving are currently developing well in the domestic market by dividing distribution networks in rural areas.

Procedures for borrowing loans from banks is still prolix, causing difficulties for enterprises, Tuan analysed. Only enterprises business effectively and have assets for mortgage and potential for debt payment are able to borrow loans from banks. Most of handicraft enterprises are production units or households with weak ability in mapping out business plans and little assets for mortgage. Moreover, some of them gave their assets as security for previous loans. The process of appraising the value of mortgaged property is very complicated because there are many kinds of craft village such as cooperative and production unit. It is difficulty to appraise mortgaged assets of these craft village kinds or the appraisement process must depend on mortgaged property of the craft villages’ managers.

 

To date, cargo certificates for the third quarter of 2009 have been ordered despite there is a reduction in prices and quantity. This not only is an optimistic sign for handicraft enterprises but also put them into a new challenge of approaching the capital source quickly in order to have enough ability to meet the cargo certificates.

 

“The government should establish a supervision team for implementation of its demand stimulus packages in a bid to timely solve difficulties for handicraft enterprises,” Tuan proposed. Recently, the craft village association has worked with relevant agencies; however, departments of Agriculture and Industry and Trade in provinces nationwide themselves have thorough grasp of production and business operations of handicraft enterprises in their localities. The departments directly approach handicraft enterprises and credit institutions, therefore they are able to hold talks with participations of the two sides, and give out solutions for solving difficulties for handicraft enterprises in the talks.