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Small wood processors face shortage of capital

Update: April, 16/2013 - 10:35

HA NOI (VNS)— Capital shortages are hindering the operation of wood processing enterprises, especially those of small and medium sizes, experts have said.

According to the Binh Duong Furniture Association, the loan interest rate remains high – making domestic enterprises less competitive.

Although the rate has been reduced to 15 per cent per year, only 0.6 per cent of enterprises say it is reasonable given the current economic conditions.

The association estimated that only 44.1 per cent of enterprises can bear an interest rate of 15 per cent in the long term.

Inventories of wood products soared 28.4 per cent this year.

Tran Quoc Manh, deputy president of the Handicraft and Wood Industry Association of HCM City, attributed this problem to the fact that companies found it difficult to access loans.

The decrease in import demand from some markets, except the US, and the increasing prices of raw materials also created difficulties for enterprises, he added.

Meanwhile, the support package from the Government had still not reached enterprises.

"Loan conditions should be loosened to support enterprises in this difficult time," said Manh.

Last year, in order to have enough capital, Truong Thanh Wood Processing Company was forced to sell the imported raw materials it had on stock at prices 20-30 per cent lower than import prices.

The company did not expect any growth in the first quarter this year. Instead, it focused on financial and organisational restructuring and hoped that production would recover next quarter, the company's director Vo Truong Thanh told Dau Tu (Investment) newspaper.

High corporate income taxes, social insurance fees and pressure from minimum salary increases also worsened the burdens to enterprises, said Le Hong Thang, director of Duc Thanh Wood Processing Joint Stock Company. — VNS

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