Indolent production hurts local economy

Factories are slowing production on the back of an insipid market

The 13th National Assembly’s 26-day fourth session kick-started last week and saw the top policy-making body’s Chairman Nguyen Sinh Hung claim “the economy’s stagnancy is looming” due to local weak production.

National Assembly Economic Committee chairman Nguyen Van Giau also rang the alarm bells by saying “signals for the economy’s stagnancy have appeared”.

Hung and Giau both said difficulties in 2013 might be even greater than this year.

This was the first time since 1990 the National Assembly dubbed Vietnam’s economic situation as being “stagnant,” according to many National Assembly members.

Nguyen Ngoc Hoa, chairman of Saigon Co.op, told VIR there was no doubt that local production was “stagnant” now. “Local enterprises’ health is currently too weak. They are in critical need of capital, losing their competitiveness and shrinking their production,” he said.

Hoa said the average growth rate for most enterprises producing consumer goods was expected to reduce to 3 per cent this year from 10 per cent last year. “The figures for footwear and garment enterprises are  expected to equal 60 per cent of their growth rate last year. The same situation is also for CoopMart.”

“Meanwhile, the costs for enterprises’ promotion programmes are expected to surge 50 per cent this year. Enterprises almost gained no profit. They are trying to keep themselves afloat. I think the economy’s stagnancy will continue in 2013,” Hoa added.

According to the National Assembly Economic Committee, the economy’s stagnancy was coupled with local weak demand, reduced imports, bad debts and high inventory levels. For example, while banks’ deposits were projected to grow 12.7 per cent in this year’s first 10 months, their credit growth rate was below zero in this year’s first half and rose only 2.5 per cent since July.

“Thus, the stagnancy also means a bottleneck in providing loans for enterprises. Only when bad debts are solved and enterprises have capital can the stagnancy be melted,” Hoa said.

A Ministry of Planning and Investment report  shows that the inventory index of processing and manufacturing industry remained pretty high, rising  20.3 per cent as of October 1.

“It is not wrong to say  that the economy is now in a stagnant stage which can even last until next year,” said National Assembly member and economist Tran Hoang Ngan.