A large number of businesses are on the verge of bankruptcy because they are entangled in difficulties, particularly with access to capital (even when interest rates have already been lowered), leading to production stagnation or disruption. Before that reality, the government of Ho Chi Minh City has put forth recommendations and solutions to rescue companies.
Ho Chi Minh City licensed 4,988 enterprises with a total registered capital of more than VND23,000 billion in the first quarter of this year, up nearly 31 percent in projects but down 7 percent in capital. Up to 5,012 businesses sent notices of operation suspension to the municipal taxation authorities, representing an increase of 4.6 times over the same period of 2011. Particularly, 1,725 companies were finalising bankruptcy procedures, 1,198 companies fled or disappeared, 463 companies transformed or restructured operating model, 490 companies halted operations without any clear reason, and 1,136 companies suspended business with a registered time limit.
The government of Ho Chi Minh City cannot see a series of businesses go to the wall without doing anything. The city thus takes very practical actions to help its enterprises out of trouble. Accordingly, the largest economic centre proposed 20 recommendations focusing on six fundamental problems, with the most notable issues being capital source and mechanism.
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Ho Chi Minh City had 4,988 new companies established but it saw 5,012 companies stop operations in the first quarter of 2012.
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Before the alarming bad debt of many enterprises, Ms Nguyen Thi Hong, Vice Chairwoman of HCM City People’s Committee, asked the State Bank of Vietnam to deal with bad debts by adopting the following measures: Increasing capital sources, ensuring capital demand for the economy and limiting risks from commercial banks. She gave emphasis to bad debts incurred by real estate businesses. Banks have trouble collecting and settling debts because real estate companies cannot sell their products. As a result, real estate companies cannot access new loans to maintain operations, let alone pass through the storm.
She also asked the central government to extend the time for tax payment in 2012 for small and medium-sized enterprises (SMEs). The city also expected to have permission to reduce 30 percent of corporate income tax in 2012. If the central government and the SBV do not radically and thoroughly deal with tax break issues for SMEs, the number of bankrupt companies will keep growing.
Apart bringing down inflation growth to ease credit accesses for enterprises, it is equally important to improve sales. If enterprises contract operations, rising unemployment and falling incomes will give rise to a series of social consequences. Hence, in addition to tax break measures rather than deferments, the government should accept a reduction in state budget collection. A reduction in incomes will entail a reduction in expenditures. If there is only a reduction in spending and there is no reduction in incomes, burdens on businesses will continue, and public investment efficiency is not improved. Proposals regarding fee collections should be considered carefully because this may further weaken companies.
N.T
Vietnamese
