2014 was a year of businesses, according to many economists. This remark was plausible because businesses were among the most affected. Many companies, particularly small and medium enterprises (SMEs), ended operations. So the issues are how this business force will be restructured, what the experience will be focused on, and how the business community and the economy will be developed at the same time, said Cao Sy Kiem, Chairman of the Vietnam Association of Small and Medium Enterprises. Anh Phuong reports.
What do you think about gains and losses of the business community in 2014?
According to the statistics, in 2014, approximately 68,000 companies went to the wall, an increase of nearly 14 percent over a year earlier. Meanwhile, also last year, only 75,000 companies were started up, down 2.7 percent against 2013. These figures portrayed the hardships facing the Vietnamese business community.
However, the business picture was not all dark because of hardships, which were to a certain extent, effective medicines for healthy businesses to rise. They not only survived, but sought out a lot of business opportunities. In 2014, as many as 22,758 companies added a total of VND595,707 billion to their working capital. Thus, the value of new investment capital injected into the economy was VND1,027,993 billion in 2014. This revealed that many companies still found footholds and positions in the tough time.
Another advantage of the Vietnamese business community is up to 96 percent were SMEs, which are employing more than 50 percent of the workforce, manufacturing more than 40 percent of consumer goods, contributing 47 percent to the country’s GDP, and accounting for 40 percent of budget revenue.
What is the toughest difficulty for SMEs?
In my opinion, one of the hardest difficulties that the Vietnamese business community or SMEs are facing is capital. Besides, inherent challenges such as technology and market are still weighing on their shoulders.
In addition, businesses in general and SMEs in particular find it very hard to access cheap capital sources. Only 20 percent of companies can borrow at an interest rate of below 10 percent per annum while others have to pay over 10 percent of interest on their loans. Many companies even have to borrow with an interest of 16 percent per annum. Capital-short companies cannot borrow money because they do not have security assets.
So, what are the solutions to this problem?
In fact, capital is a necessary input for any economic actor, not just businesses. So, instead of relying on the State and the banking system to extend their arms to help, businesses should first and foremost save themselves by rearranging business structures like human resources, scientific and technological investment, business network expansion, market, and cooperation with peers to capture information more quickly. Then, they can apply solutions and strategies to revive production and business activities.
As for banks, if they refuse to lend money on fear that borrowers will not be able to repay, no money for businesses will be available. Instead, they should adopt more flexible and friendlier policies and learn why companies fall short of capital or have their assets blocked. Banks may use such blocked assets like stockpiled real estate, sugarcane, factories and machines as security assets for new loans.
Are these overall solutions to improve the health of the business community?
Capital is extremely vital to any business. But, apart from capital, other factors also determine the fate of a company. As known, for a long time, cumbersome and troublesome administrative procedures took enterprises' time and funds. Hence, the State must have institutional changes to reduce unnecessary administrative procedures and boost information transparency to create a healthy, competitive business environment governed by market supply and demand laws.
In addition, the Government must have other practical supports like lowering interest rates, rescheduling tax collection, slashing taxes, opening training courses, and equipping businesses with new technologies. The Government also needs to focus on seeking new markets for enterprises and establishing new markets while protecting traditional ones.
To provide maximum support and form a healthy playground for all enterprises, especially SMEs, the Government advocates drafting the Law on SMEs. Is this a positive sign?
In my opinion, lawmakers should sit together to seriously consider this because we now have many laws governing business entities. We need to clarify SMEs’ requirements and avoid overlapping with the recently amended Law on Enterprises. We should not focus too much on increasing the number of SMEs, but on sustainable development and competitiveness enhancement.
Potential and prospects of the business force, especially SMEs, are enormous. However, can SMEs become the nuclei of local economic development?
Currently, most major profit-making companies are concentrating in big cities like Hanoi, Ho Chi Minh City and Danang. A majority of companies in provinces and cities focus on tapping local potential and advantages like fisheries, mineral, crops and cattle. Economically, a local business will contribute significantly to its locality as it helps increase investment for economic, social and political aspects.
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