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Demand key to survival in moribund market

Update: March, 04/2013 - 11:00

Nguyen Manh Thang
(VNS) When the domestic property market will escape from the current stagnant situation remains a question in a struggling economy. Nguyen Manh Thang, chairman and general director of the Song Da 7 Urban and Industrial Zone Investment Joint Stock Company, speaks to the Viet Nam News about the company's experiences in surviving the hard times.

The economic downturn has caused the real estate market to slump sharply and freeze over the last two years. You told the press at the end of last year that your company's business situation "is still ok". How could it be?

In the tough context of the global and domestic economies, particularly the construction and property industries, we managed to reach satisfactory production and business results, thanks to many factors. The most important thing was that we assessed ourselves accurately so that we could position our strategies, customers and products successfully.

What projects did you concentrate on in 2012?

Last year, we concentrated on implementing several projects to transfer to customers such as Phung Khoang and Xuan Phuong new urban areas and a housing project serving officers of the National Institute of Burns, and began construction of two projects in Ha Noi's Cau Giay and Thanh Tri districts.

Investment, turnover and profit targets we set for the year were all fulfilled. We delivered VND136 billion ($6.5 million) into the State budget, assured an average income of nearly VND97 million ($4,600) for each worker per year, and most importantly, we owed no taxes, social insurance and wages.

How did your company mobilise and manage investment capital to develop projects and maintain stable operations while the Government tightened lending into the property market to cope with the crisis?

Capital sources we raised for developing projects and maintaining operations included the company's equity, credit and money advanced by customers. Loans were just one of the three, and I would note that the Government had "tightened lending" but had not "stopped lending" for real estate. Banks at which we were a borrower were also much in need of good customers to disburse capital and seek profits. By our will and actions, we always aimed to use capital for exactly defined purposes and never targeted non-core lines of business.

A view of urban developments in the west of Ha Noi. The urban and industrial zone sectors are said to have a brighter outlook than other areas of the property market in the short- and medium-terms. — VNA/VNS Photo Huy Hung

The economy in general and the real estate-construction markets in particular were forecast to continue to see many challenges this year. What directions and strategies do you have to cope with this situation?

I agree with some experts who say this year requires "optimism with caution". We will speed up implementation of investment projects which can be completed in 2013 or the first half of 2014, and at the same time arrange reasonable investment phases for projects to be carried out afterwards.

How is the prospect of urban and industrial zone development in comparison with other areas of the property market? Will there be any temporary adjustment in your company's business areas to adapt to market conditions?

In the short- and medium-terms, I suppose that the urban and industrial zone sectors still show brighter outlooks than other areas such as commercial offices, hotels and resorts. Our current investment portfolio doesn't include these latter areas.

Two years ago, your company and the Bank for Investment and Development of Viet Nam (BIDV) signed a comprehensive co-operation agreement on credit supply and banking services for the 2011-15 period. How is this strategic relationship shown during this hard time?

This co-operation in the last few years brought us many practical results. BIDV sponsored several projects of ours such as the Phung Khoang new urban area and an apartment building in Cau Giay, and we also used more card and online payment services provided by the bank. With goodwill and efforts from both sides, I believe that this co-operation will continue to benefit the two. For us, BIDV is a very important partner but it's not the only one.

The Ministry of Finance has presented some tax extension policies to the Government to be applied from the beginning of this year to support enterprises in many areas, including those involved in construction, real estate and infrastructure. What do you think about the effects of these policies on property firms?

I think that these policies will help ease difficulties for enterprises, but they are not the top measures. The property market can't stay apart from the economy's health and people's incomes, so only when these factors improve will market confidence and purchasing power be restored. This is the most important thing.

Solving bad debts in the real estate sector is among the nation's top priorities to unfreeze the property market and clear credit flows in the economy. What is your view and what will your company do to contribute to dealing with this issue?

This is a thorny puzzle, which requires the efforts of the Government, ministries, sectors and enterprises. Government macro-level policy management is extremely important but companies can't count on these policies only. Every firm must work out its own strategy to exist and develop, based on its strengths and weaknesses as well as risks and opportunities.

From our investment practices, we define our ways of doing business as: following real customer demand rather than catching speculation opportunities, considering this the basis for existence and development; staying cautious in selecting investment portfolios and using capital even in advantageous conditions, avoiding massive investments and overheated growth; not setting too high prices following market spirals; publicising information about products with their true values; not approaching customers at any cost; paying adequate attention to human resources, corporate culture and cost management; harmonising the interests of investors, contractors, banks, workers and the community.

How long will it take the property market to escape from the stagnant situation?

Everyone wants to know the answer to this question but hardly anyone can pinpoint a specific and reliable milestone.

Rescuing the property market is urgent since this is an important area that is closely associated with the financial market. The Government has taken some measure to heat up the market and prevent it from causing further damages to the economy and the nation's land and other resources, but the process is still seeing tardy progress.

Industry insiders and public opinions are having many conflicting views about the matter and this causes even more complicated situation for firms doing true business.

The way I look at it, companies need to have strategies to adapt to different scenarios of the economy from good to less advantageous. I believe that this hard time will help purify the market and open up a new period with more quality development when the economy recovers. — VNS

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