Struggling HCM City firms seek assistance

A plastic pressing system of Cho Lon Plastic Joint Stock Co in HCM City. The biggest difficulty facing local enterprises has been a sharp increase in input costs. — VNA/VNS Photo Van Khanh

HCM CITY — The HCM City Enterprise Association (HEA) has proposed that the municipal administration take urgent measures to financially support local small- and medium-sized enterprises (SMEs), an association source says.

It said in a proposal last week that 60 per cent of SMEs in the city needed capital to maintain their operations, and only 20 per cent were capable of surviving a prolonged economic crisis.

The situation is set to worsen for enterprises this year as global and local economic instability continues.

The biggest difficulty facing local enterprises was a sharp increase in input costs (cost of direct material, direct labour and other overheads incurred in the production of a good or service), the association said.

Input costs had gone up by 30 per cent due to high interest rates and social insurance fees in addition to increases in prices of input materials and services, including electricity and petroleum products.

Meanwhile, selling prices of products had only increased by between 5 and 7 per cent, it said.

The association also pointed out other obstacles that local industries were having to cope with.

The stagnant real estate sector has brought the construction industry to a standstill, virtually. Consequently, the building materials production industry is confronting large stockpiles and declining sales.

Many enterprises producing building materials have stopped operations or announced bankruptcy.

The amount of goods in stock in the processing and manufacturing industries saw a year-on-year increase of 17.4 per cent.

The amount of processed fruits and vegetables in stock increased by 80.6 per cent. Fertiliser stock is up 71.9 per cent; cement, up 61.8 per cent; and steel, 53.4 per cent.

Since the beginning of the year, the garment and textile industry has seen a serious decrease in the number of export orders because purchasing power in the US and European markets has gone down.

Other difficulties facing apparel enterprises include shortage of workers and land for production, and complicated administrative procedures.

Nguyen Trong Hanh, deputy director of the municipal Taxation Department, said the number of enterprises declaring losses in 2011 increased by 15 per cent over the figure in 2010.

Support measures

The HEA called on the city to provide priority capital support to agriculture enterprises as well as SMEs involved in production of essential consumer products and export products.

SMEs involved in the apparel, leather footwear and fisheries industries should be offered tax deductions or allowed to delay tax payment, it said.

Measures to keep the exchange rate stable were also very necessary, it added.

Firms involved in the real estate sector should be provided with access to capital, with priority given to projects that had at least 70 per cent of their construction work completed, the association said.

Dang Duc Thanh, general director of the Can Nha Mo Uoc Joint Stock Company, said the Government would benefit more if it allowed individuals and enterprises to pay lower land-use fees.

When enterprises were supported thus, they would do better business and pay higher taxes, Thanh explained.

Hanh of the tax department suggested the Government strictly control banks' lending operations.

At present, many banks were ready to provide credit to other banks but not enterprises, he said.

Le Manh Ha, depuy chairman of the HCM City People's Committee, said the local administration would consider the association's proposals and hold further discussions with its members on measures that could be taken to address difficulties facing them. — VNS