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Building materials sector battles slumping demand

Update: June, 27/2012 - 10:08

HA NOI — The Viet Nam Building Materials Association is proposing measures to save an industry that is sinking under reduced production, high inventories and threats of insolvency.

Demand for building materials has fallen sharply since late last year, as State and private investment in construction have been cut drastically, association chairman Tran Van Huynh has reported to the Prime Minister. The industry was facing a myriad of challenges including high electricity and input costs, high interest rates, disadvantageous exchange rates and a lack of capital, he said.

Stockpiles of building materials have mounted alarmingly but the industry was unwilling to cut prices dramatically for fear of further undercutting the long-term viability of enterprises and threatening jobs, said the general director of cement producer Vicem Hoang Thach, Dao Ngoc Binh.

Cement producers had suffered high losses and seen growing stockpiles all year, and some were at risk of bankruptcy, said Viet Nam Cement Association general secretary Do Duc Oanh. The industry has three million tonnes stockpiled, worth VND3 trillion (US$145 million), and the construction industry was not expected to pick up anytime soon, he said.

To solve the difficulties facing the building materials industry, Huynh urged the Government to increase infrastructure construction by building roads in rural area, upgrading provincial and national highways, and building improvements in industrial zones.

He also called for a reduction in the value-added tax on building materials from 10 per cent to 5 per cent to encourage consumption and help reduce inventories.

For the long term, the Ministry of Construction needed to restructure the cement industry to reflect real demand on the domestic market and develop a plan for the import and export of building materials to reduce imports and increase the use of local products.

Banks also needed to refinance existing loans to building material producers and create more favourable conditions for producers to obtain additional credit, Huynh said. — VNS

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