Tough Year for SMEs

Mr Dang Duc Dung, Vice President of Hanoi Young Business Association, said: Although the Government has skilfully and staunchly led the Vietnamese economy out of the global financial crisis burst out two years ago to maintain growth of 6-7 %, its recent efforts failed to ease interest rates to facilitate businesses to seize long-term investment opportunities while the economy needs much more jobs. Though the State Bank of Vietnam (SBV) urged commercial lenders to lower interest rates, it had to raise the base rate in November due to growing pressures from rising gold price and exchange rate - a speed is like the Vietnamese dong is devalued.

 

Prices of many commodities went up, posing another capital problem for businesses to solve. Prescheduled price rises of coal, electricity and petroleum and exchange rates are increasing cost burdens on SMEs. Higher borrowing costs at commercial lenders are narrowing the access of SMEs to financial sources for business development. “Capital shortage and excessively expensive capital sources are, and will be, the hardest difficulties for non-state enterprises. Capital sources continue to be poured into infrastructure construction and other industries invested by the State while recent evidences show that State-owned enterprises (SOEs) do not create new jobs, operate poorly or even suffer heavy losses,” Dung said.

 

Besides, the Vietnamese macro-economy is not stable. Budget deficit remains high while balance of trade, balance of payments and current accounts have not been improved significantly. These destabilised the macro economy, caused inflation to return, and prevent the development of businesses.

 

Facing with these difficulties, the resilience of Vietnamese SMEs is very weak. With limited capital resources and obsolete technologies (according to a recent survey, more than 90 % of SMEs are using medium or lower technologies) and heavy reliance on export markets, difficulties facing Vietnamese SMEs are snowballing.

 

Ms Pham Thi Thu Hang, Director of Enterprise Development Foundation under the Vietnam Chamber of Commerce and Industry (VCCI), said: According to a survey in 2010 by VCCI, 89 % of SOEs have fixed business locations while 51 % of private businesses use their dwelling as working places. Only 2 % of private enterprises are accessible to industrial zones. The private economic sector has not been treated equal to State-owned entities when they access to capital and land resources.

 

Besides, Vietnam’s SMEs lack cooperation in doing business and creating a common voice for the joint benefit of the community. They do not have long-term visions and wish to earn as much and quick profit as possible. They also have limited management skills, business awareness, business culture. Etc.

According to Mr Cao Sy Kiem, Chairman of the Vietnam Association of SMEs, it is very difficult for companies to access bank loans given high interest rates. In order to reduce interest rates, Vietnam should create conditions for enterprises to boost production to bring down consumer price index, strengthen macroeconomic stability and narrow trade gap. Then, interest rates will naturally fall down without administrative orders.

 

He added, to help SMEs cope with difficulties, it is essential to quicken the effective enactment of the Government’s Decree 56/2009/ND-CP on supporting SMEs. According to this regulation, SMEs are provided supports of finance, information, human resource training, scientific and technological application, etc.

 

“Most Vietnamese businesses hope to have equal access to State policies and minimum red tape, not State supports,” Kiem said.

 

Mr Phung Anh Tuan, Member of the Executive Board of the Ho Chi Minh City Young Business Association (YBA), said: In an effort to implement strategic policy of building an equal, competitive, transparent and efficient business environment, it is time the Government considered an end to direct formation and management of operations of State-owned economic groups. The Government should not set up more economic groups but privatise operational State-owned economic groups to boost corporate management and performance. In the long run, the private sector will establish economic groups to avoid conflicts of interest and objective management of the Government over operations of economic groups.