Increasing Inventories Put Enterprises into Difficulties

 

Previously, although the Government issued Resolution 02/NQ-CP on solutions supporting production, trading and dealing with bad debts, inventories of enterprises did not reduce. GSO’s socio-economic data show that on 1^st March, inventories index of processing and manufacturing industry increased 16.5 pct over same period of previous year, but was lower compared to that of February 2013 (19.9 pct). Several sectors saw reduced inventories such as textiles, paper and paper products, electronic products, beverages…but there are many sectors that cannot solve inventories problem such as drug production (up 22 pct), chemicals and pharmaceuticals (up 27.4 pct), concrete and concrete products (up 28 pct), production of beds, wardrobes, tables and chairs (up 28.4 pct). Electric wire and cable manufacturers even suffered a sharp increase of 62 pct… In Ho Chi Minh city, inventories of electronic – relevant products were enlarged 93.4 pct.

 

In real estate field, according to Ministry of Construction, there are about unsold 42,000 houses including 26,444 apartments and 15,788 low storey houses nationwide. In Hanoi alone, inventories are very large with about 5,789 apartments (equivalent to 566,610 sqm. floor), 3,483 villas and townhouses (equivalent to 566,610 sqm. floor) as well as about 175,000 sqm. of offices for rent.

 

With steel, to 15^th March 2013, inventories reached about 330,000 tonnes, up 15 pct (equivalent to about 50,000 tonnes) over same period of previous year; there were about 0,87 million tonnes unsold cement, up 25 pct (equivalent to 17,000 tonnes); Clinker also suffered inventories of 2.3 million tonnes, up 5 pct (equivalent to 10,000 tonnes).

 

In sugar industry, according to statistics of Vietnam Sugar Association, at the end of Quarter I of 2013, amount of inventories was about 40,000 tonnes. This is considered the largest inventories ever. The main reason is sharp decline in consumption versus increased production.

 

Increased inventories are putting certain pressure on enterprises. Macro-economic turmoil has influenced wide and deeply production and trading; frozen real estate market effects market demand, seriously damages relevant production sectors like cement, iron, steel, brick.

 

In fact, the Government has directed many solutions to stimulate market, especially Resolution 02/NQ-CP dated 7^th January 2013 on supporting enterprises, market and dealing with bad debts. Accordingly, the Government cooperates with ministries and industries to deal with inventories and difficulties of enterprises, stimulate business with solutions such as reducing taxes, regulating objects having priority to get loans, handling with inventories in social housing segment…

 

However, these policies have not made effects. According to many experts, the Resolution was issued on Lunar New Year, therefore till now there is still latency. Meanwhile, many supporting solutions are still lying on paper such as credit packet of VND 30,000 billion with low interest rate for real estate market to support people those want to rent house or build social houses. It is still difficult for enterprises to access capital, mainly due to loan procedures. All of these factors make handling with inventories become harder.

 

Economic experts also said that, under this difficult situation, enterprises themselves should actively approach markets, restructure flexibly and improve competitiveness.

 

According to Mr Nguyen Thanh Hoa, Deputy Director of Planning Department (Ministry of Industry and Trade), enterprises have been conducting solutions which are resulted in large inventories in the downtrend. In the future, Government and Ministry of Industry and Trade will actively implement Resolution 02 to improve its effectiveness and gain enterprises’ trust.