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Small businesses seek official help

Update: March, 14/2012 - 10:12

HCM CITY — Faced with capital shortages, higher production costs and a fall in overseas demand, small- and medium-sized enterprises (SMEs) in HCM City have asked the local government for help.

Nearly 60 per cent of SMEs do not have enough capital to maintain their production, according to Pham Ngoc Hung, deputy chairman of the HCM City Union of Business Associations.

Speaking at a meeting held in HCM City yesterday between city officials and business representatives, Hung said that many enterprises had had difficulty accessing capital from banks, leaving many of their projects at a standstill.

Interest rates on bank loans fell this year but remained high at more than 20 per cent, making it difficult for companies to earn profits. An increase in input costs has also caused problems for companies, especially SMEs.

In general, production costs have risen 30 per cent, but sale prices have increased by only 5-7 per cent, eating into profits, according to Hung.

For some companies, losses have occurred because of higher costs for materials, salaries, social insurance fees, land rentals, electricity and other services.

Tran Viet Anh, chairman of the Thu Duc Business Association, said companies were also paying too much tax for plastic bags.

Under the Environmental Protection Tax Law, environmentally friendly bags are not taxed, but companies often pay tax on the bags because there is no agency to verify which bags are classified as environmentally friendly.

As a result, tax agencies imposed the tax on all plastic bags, pushing up costs further. Agencies should devise a strategy to deal with the problem, Anh said.

Nguyen Trong Hanh, deputy head of the city's Taxation Department, said tax agencies had had problems assessing tax on plastic bags because the Ministry of Natural Resources and Environment had not developed any standards regulating environmentally friendly plastic bags.

In addition to rising costs, companies are also facing lower demand from importers because of economic difficulties globally.

For example, the garment and textile as well as leather and footwear industries have reported a significant drop in export orders this year, with some enterprises in the footwear industry reporting a drop of 30-40 per cent in export contracts.

Other problems for companies include labour shortages, especially for skilled workers, and cumbersome administrative procedures.

The city's Union of Business Associations urged local officials to help businesses access capital at lower interest rates so they could continue production and ensure work for employees.

Dang Duc Thanh, general director of Can Nha Mo Uoc Investment JS Company, said: "The municipal government should develop measures to rescue the property sector. If that sector developed, other industries like steel, construction materials would follow."

Meeting participants also asked the State Bank of Viet Nam to reduce interest rates on loans and set a ceiling on these rates.

A representative of the State Bank of Viet Nam's HCM City branch said the bank had provided loans for 87 per cent of applicants last year. The remaining 13 per cent of applicants did not meet loan qualifications. He also asked commercial banks to provide loans in foreign currency to companies with sufficient conditions to borrow US dollars.

They also requested that relevant agencies review the policy on land-use fees, saying that the fees should be lowered.

In addition, business representatives asked the city to contribute to social insurance payments for employees. Companies and their employees combined now contribute an average of 30.5 per cent for premiums, compared to 27 per cent previously. — VNS

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