Vietnam's economy is considered to have got out of the bottom, with several positive signals. However, the business community is still facing many difficulties due to rising input prices and the market which has not prospered. In the first 4 months of the year, nearly 22,300 enterprises faced severe difficulties and had to shut down their business. This figure is nearly 5 percent higher than that of the same period last year.
As reported by the General Statistical Office, in April 2015, more than 4,300 enterprises nationwide fell into predicament. Particularly, as many as 3,670 enterprises ceased operating and 684 completed dissolution procedures. These figures increased by 58 and 34 percent, respectively, compared to March 2015.
Over the 4 months, the number of enterprises ceasing operation increased nearly 5 percent compared to the same period last year. Most of these are small companies with capital less than VND10 billion. The number of enterprises completing dissolution procedure fell by nearly 1 percent, staying at 3,249.
However, April 2015 recorded nearly 9,200 newly established enterprises. For the first 4 months of this year, there were 28,235 newly established enterprises with the total registered capital of VND162,500 billion, an increase over the same period of 2014. However, it is noteworthy that the scale of new businesses has declined. To be specific, the capital of newly established enterprises of April reached only VND5.6 billion, a decline compared with VND6.4 billion of March 2015.
The biggest difficulties enterprises currently face are low product consumption, higher capital and input costs. The simultaneous electricity, gas and exchange rate increases have left many businesses concerned about lost profits. To survive, the problem of the maximally reducing cost to lower product prices is ever more stringent to enterprises.
That exchange rate has been revised up by 1 percent is causing further difficulties for businesses. Increasing rate has made import costs higher. In addition, the domestic material suppliers often take advantage of the situation to increase the price of raw materials, which is usually higher than the exchange rate increasing. Despite rise in input costs, output products’ price cannot be increased due to weak demand. Only exporters benefit from rising rates because increasing exchange rate means increasing profits if changed into VND.
Many enterprises now fear that in the future, exchange rate will continue to rise due to rising foreign currency demand because enterprises will import input materials for production of the end of the year and enterprises which buy dollars have to repay loans.
One of the export sectors which still face difficulties this year is textiles. Of the total exports in 2014, domestic enterprises accounted for only about US$6 billion in the total of more than US$20 billion. In particular, domestic enterprises applying FOB (purchasing raw materials, producing and selling products directly without going through intermediaries), currently accounts for 20 percent; the rest are producers of processed goods. Such profits are negligible for enterprises. Enterprises eligible for bank loans with the interest rate of 0.5 percent a month make profits of only about 0.3 percent a month. However, only large businesses with reputation are eligible for loans at this rate. Currently, only 30 percent of textile enterprises are making profit. In 2014, as assessed by many businesses, most of them just managed to reach break-even point.
More worryingly, in the past 2 months, the export market of many commodities has been worsening. Not only watermelon and onion, but also many other agricultural commodities are not able to be sold due to fierce competition. Purchasing power is still quite weak. If exchange rates increase, commodities will hardly be able to be sold, thus inventory will increase.
Reporting to the National Assembly Standing Committee at the opening of the 38th session on May 11, Minister of Planning and Investment Bui Quang Vinh said that in the first months of this year and the whole year, economic growth is expected to still face many difficulties.
According to Minister Bui Quang Vinh, in general, the economic situation is stable and inflation is controlled at a low level. However, difficulties still riddling the economy have negatively affected growth, as exports decrease and imports increase. The Minister said that, if no strong measures to remove current difficulties are taken, the economy in the last 6 months of 2015 will be very challenging, annual growth rate may not be that high, and the target of 6 percent annual growth is not an easy mission.
Vietnamese
