Helping Businesses in Long-term Investment

According to VCCI surveys in 2012, all indexes on business activities have declined, especially profit per product, overall turnover and unsold stock.

 

Among difficulties, access to capital was the biggest for businesses in 2012. The VCCI survey shows that the percentage of businesses borrowing credit decreased from 54.45 percent in 2011 to 49.23 percent in 2012, and 3 percent of those borrowing credit from the “black market” at much higher interest rates compared to commercial banks. Small and medium sized enterprises (SMEs) faced even bigger difficulties. Their debts make up 35 percent of the total. Collateral remains the main hurdle compelling them to seek unofficial capital resources.

 

The survey also shows that 65.3 percent of businesses feel lower interest rates have boosted business activities, while 24.9 percent consider that, due to lower consumer demand, they do not need to use credit for business expansion. Only 9.1 percent of businesses believe that the lower interest rates have improved the macro-economy.

Regarding interest rates, the survey in the third quarter showed that 82.6 percent of businesses were borrowing at interest rates below 15 percent. Though the government is trying to bring down the interest rate to 15 percent, only 0.6 percent of businesses believe it is reasonable in the present time.

 

Indeed, those are serious difficulties of businesses in 2012. The survey shows that 63.1 percent of businesses believe unsold stocks are their main concern. Due to the recession in real estate market, the consumption of building materials decreases drastically and unsold stocks reach alarming situation.  

In addition, the main concern of investors and businesses is financial system stability, especially bad debts of the banking network. Although they share their views and confidence in measures taken by the State Bank, investors, especially foreign investors, hope that the government and the State Bank would soon give up temporary administrative measures and return to market process.

 

We have recommended the State not to burden businesses with more difficulties, but to maintain policy stability, reduce taxes and fees, and accelerate administrative reform. Good examples have been attained in certain localities and should be multiplied: in coordination with authorities, commercial banks have reviewed businesses and projects and facilitated their access to capital.

 

In particular, the government should slow down the application of taxes and fees, reduce land rental and maintain stable rental for certain years.

 

So far, we just made initial steps in the restructuring and short-term problems must also be settled. I think both short-term and long-term measures must be taken together. Alongside with measures and efforts for a stable macro-economy, the government should continue putting high priority on institutional reform, accelerate economic restructuring in the long-term and a stable orientation instead of a short-term one.

 

Macro-economic stability, especially institutional reform and economic restructuring, are main concerns of businesses. They will give businesses confidence in making long-term investments. At the same time, the government should accelerate the restructuring, especially in State-owned enterprises, banks and public investments, develop a transparent and equitable business environment for all economic sectors in access to resources.