Economy still a conundrum

Many manufacturers are still being weighed down by massive inventory levels

The National Assembly’s Standing Committee last week agreed that high inventory levels in real estate construction and other sectors had resulted in many bankruptcies and unpaid debts.

“High inventory levels and bad debts have a close relation. If the problem of high inventory levels is settled, bad debts are also solved,” said Phung Quoc Hien, chairman of the National Assembly Committee for Finance and Budget.

According to a Ministry of Planning and Investment (MPI) report released at the session, the inventory indexes of several industries as of September 1 were still high. For example, the inventory index of the processing-manufacturing industry rose 20.4 per cent year-on-year, plastics 50.6 per cent, cement 50.2 per cent, iron and steel 40.6 per cent, medicine 40.3 per cent, apparel 39.4 per cent, automobile 37.8 per cent and poultry feed 37 per cent.

MPI Minister Bui Quang Vinh affirmed “the real estate inventory is surely very huge.” National Assembly Chairman Nguyen Sinh Hung said: “As I know, the banking system’s total outstanding loans now reach VND2,000 trillion ($96.6 billion), of which the real estate sector accounts for up to 50 per cent.”
 
State Bank Deputy Governor Nguyen Dong Tien and the National Assembly Economic Committee chairman Nguyen Van Giau said the outstanding real estate loans accounted for 5 per cent, or some VND140 trillion ($6.7 billion), of the banking system’s total outstanding loans.

Hung, however, said the actual figure must be much higher.

“A lot of apartments, villas and semi-detached houses have found no buyers,” Hung said.

“A huge number of housing works are delayed, causing a huge inventory of building materials such as cement and steel. Because the project owners are unable to sell their housing products, they cannot pay debts for banks. Thus, the outstanding loans of the property sector are extremely big.”
   
Hung said from now to the end of 2012 and in the first half of 2013, the inventory level and bad debts must go down. He suggested banks consider increasing consumption loans and loans for housing to unblock the real estate market. 
      
In order to deal with high inventory level, Vinh suggested urgent solutions to boost production and consumption of goods such as cement and steel, increase the disbursement of overseas development aid and social investment, plus expand domestic and foreign consumption markets, and help business access soft loans to recover production.
    
According to the MPI’s report, the number of businesses halting operations due to difficulties reached more than 40,000 in the year until now.

Hung asked the government to propose specific solutions for the problems.