Businesses left black and blue

A General Statistics Office (GSO) report shows industrial production value rose 7 per cent on-year to the end of October 2011, down from 9.7 per cent in June, 8.8 per cent in August and 7.8 per cent in September.

“We have seen a decline in industrial production,” said Nguyen Thanh Hoa, deputy director of the Ministry of Industry and Trade’s Planning Department.
The GSO also reported that unsold manufactured products surged by 21.1 per cent on-year to the end of September, while sales rose only 15.6 per cent.
Vietnam’s total retail turnover increased 23.1 per cent on-year by the end of October, according to the GSO. Yet the real increase was just 3.9 per cent if price hikes were not factored in. “This mirrors very low consumption in the market,” said Nguyen Bich Lam, GSO deputy general director. He predicted industrial production would keep slowing amid weak consumption and high inventories. The latest GSO figures provide further evidence that high inflation is weighing heavily on manufacturers.

But there are some silver linings. Vietnam experienced a welcome slowed consumer price index (CPI) growth in October to 0.36 per cent from 1.17 per cent in July, 0.93 per cent in August and 0.82 in September, suggesting that the worst may be over. However, on-year inflation remains high at 21.59 per cent, the GSO reported.

To tackle this issue, the government is holding firm on tightened monetary and fiscal policies, a move which has resulted in high lending interest rates at banks and delays to thousands of public investment projects. Hoa said manufacturers were facing tough challenges with rising production costs and low demand taking toll.

“The prospect of businesses driving growth is being constrained by ongoing uncertainty, especially given the government and consumers are reigning in spending,” Hoa added.
Meanwhile, the Ministry of Planning and Investment reported 48,700 enterprises had closed their doors or halted operations in the first nine months of 201, up 21.8 per cent from a year earlier. The sum included 5,803 enterprises which declared bankrupt, 11,421 halting operations and 31,477 being not able to pay tax but not yet filing for bankruptcy.

However, chairman of Vietnam Association of Foreign Invested Enterprises Nguyen Mai said the current difficulties of the economy would not significantly impact on long-term investors in Vietnam.

“The disbursement of FDI indicates that many investors still believe in doing business here,” Mai said, adding that Vietnam remained an investment destination with great potential in Asia.
A General Statistics Office report shows the export turnover of foreign-invested enterprises was $43.2 billion in the first 10 months of the year, up 38.1 per cent against the same period last year.
“We can see that more foreign investors consider Vietnam a production base where they can take advantage of the cheap workforce and political stability to export products worldwide,” said Binh.
In a bid to bolster FDI disbursement in Vietnam, the government is implementing a swathe of measures aimed at making life easier for investors. These include investment plans for transport infrastructure and power projects as well as strategies for slashing red tape.