New cures needed for struglling enterprises

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“The current difficulties facing firms could be swept away if enterprise-oriented solutions on product consumption and a resolution of non-performing loans were implemented. Many of the existing solutions have proved ineffective,” said the committee’s chairman Nguyen Van Giau at last week’s National Assembly meeting.

For example, since May 2013 the government has deployed a VND30 trillion ($1.43 billion) package to provide loans for people and enterprises to buy social housing. However, by late August, only about VND100 billion ($4.7 million) had been disbursed.

“The economy has been stagnating due to over-tightening of resources used for growth. Over the past three years, bankruptcy and the suspension of operations by a many enterprises has resulted in slow growth. Local demand for goods and services is declining. If this situation continues, there will be medium-term macroeconomic instability,” Giau warned.

Nguyen Quang Duc, vice head of the marketing section under locally-owned Pico Joint Stock Corporation’s Pico electronics supermarket chain, told VIR that the chain’s ten-month sales volume had decreased 15 per cent on-year.

The corporation’s revenue for 2013 was expected to decline from $144.23 million last year to around $115.38 million this year.

“Some of our rivals like Nguyen Kim, HC, Media Mart, Top Care and Tran Anh are bogged down in difficulties due to low sales. To keep our business afloat, we are offering an average 20 per cent discount on many products,” he said.

According to a September survey of 500 people in Hanoi and Ho Chi Minh City by independent market research company Indochina Research, 50 per cent of respondents claimed that their financial situation was the same compared to last year, and 34 per cent believed it was worse. The results also confirmed that the older respondents were worse off, with 44 per cent of those over 40 claiming they were worse off financially than a year ago compared with 21 per cent of those aged below 25.

Some 36 per cent of the two cities’ respondents said it was bad time to buy major household items now.

Japan-backed FTA Research & Consultant Company said in its recently-released survey of 300 consumer demand for home appliances revealed that due to belt tightening 62 per cent of respondents in Hanoi claimed they would only buy electronics items and kitchenware if desperately needed, with the figures in Danang standing at 38 per cent and 36 per cent in Ho Chi Minh City.

The committee reported that this year’s first nine months witnessed a record number of over 60,400 enterprises cease operations or going bankrupt, including over 18,600 enterprises simply absconding. Registration of new capital for businesses decreased 21.6 per cent on-year.

The Ministry of Finance reported that in this year’s second quarter, the number of enterprises declaring losses accounted 66 per cent of total corporate tax declarations. Their losses climbed 7.5 per cent on-quarter and 11.9 per cent on-year.

The committee also announced that local production woes would lead to a major budget deficit of VND59.43 trillion ($2.83 billion) for 2013, with the figure possibly being far higher next year.