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More companies closing down, curbing production

Update: December, 13/2012 - 10:25

HA NOI (VNS)— The number of enterprises which dissolved or halted operations had reached 48,000 in the first 11 months and were anticipated to hit 55,000 by the end of this year, Deputy Minister of Planning and Investment Dang Huy Dong reported at an investment forum on Tuesday.

The numbers were lower than the number of newly established businesses, which totalled nearly 62,800 in this period, Dong said.

"We need to assess the business situation and trends correctly," he said. "In 11 months, dissolutions occurred mainly in real estate and stock market sectors, while new enterprises were in such areas as education and healthcare."

Nguyen Hoa Cuong, deputy director of the ministry's corporate development department, said, "A massive collapse won't happen, especially in the case of small- and medium-sized enterprises which are highly resilient to tough conditions.

"There has been a strong shift from risky sectors to more sustainable areas."

Small- and Medium-sized Enterprises Association chairman Cao Sy Kiem said it was necessary for the country to analyse exactly the situation of enterprises in order to have relevant policies.

For example, it needed to define how many firms had left one sector for a new area so that appropriate lending policies could be put in place.

"It's because we haven't thoroughly grasped their situation . . . that the many difficulties businesses have been complaining about from the beginning of the year haven't been solved," he said. Kiem said that while enterprises faced many challenges like capital shortages, high inventories and narrowing export markets, the Government's support policies — including tax payment extensions and land rent reductions — were not up to expectations.

Firms even had to cope with electricity and gasoline price hikes and additional road-use fees, he said, adding there was a lack of effective co-operation among relevant agencies in supporting enterprises.

Senior economist Pham Chi Lan said tax payment should be considered a basis for assessing a company's health. She said that with 40 per cent of local businesses now incapable of paying taxes, according to recent taxation sector's data, many firms had had to cut back production, while still remaining operational.

"Enterprises dissolving were a real fact which resulted in thousands of workers losing their jobs, while newly registered companies haven't yet been able to prove anything," she said. "Don't think that new businesses can compensate for those which have died."

An unnamed economist told Vietnam Economic Times that lending interest rates had fallen but were not enough for enterprises to absorb capital at present.

The economist was reported to have said if inflation reached 7.5 per cent, banks could set lending rates at around 10.5 per cent to be profitable, but many were offering higher levels.

More support from banks and credit guarantee funds were needed to prop up enterprises, in addition to the Government's tax reduction and exemption policies, the economist said. — VNS

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