The situation of businesses worse than thought

The situation of businesses worse than thought

The figures released by taxation bodies, the Ministry of Planning and Investment, Small and Medium Enterprises’ Association and the Vietnam Chamber of Commerce and Industry (VCCI), all show that a lot of businesses are sinking.

Businesses pushed against the wall

Luc, the director of a 3-year old architecture consultancy and construction company, has assigned the company’s management to a friend after he has taken a job for a state owned enterprise.

Luc’s company once enjoyed the bright days when the market was bustling thanks to the government’s demand stimulus package. The monthly income of the company was high enough to pay 20 engineers, architects and for saving.

However, fewer orders have come recently. In the past, Luc only accepted projects worth tens or hundreds of billions of dong, but now he has to accept small ones, worth several billions of dong only. With the projects, the company can pocket modest profit, because the commission has been raised from 10-15 percent to 30 percent.

Finally, Luc decided to take a job at a state owned enterprise, because he hopes the job would bring more relations that help him obtain contracts for the private company.

However, since he took the job, he has got some small orders only. Especially, the clients all have been very slow in making payment. As a result, he has to use the pay he gets from the state owned enterprise to pay to the staff of his private company.

The Ministry of Planning and Investment has confirmed that 28.4 percent of registered businesses have got dissolved (81,900), or have reported the operation interruption (16,000), or have disappeared without making notices (85,800).

Meanwhile, a survey conducted by VCCI shows that 8.4 percent of its members got dissolved or stopped operation in 2011.

The statistics released by taxation bodies show that the total budget collection from domestic sources in the first quarter of 2012 was 141 trillion dong only, or equal to 97 percent of the same period of the last year. Of this amount, the VAT collection increased by six percent only, the lowest level in the last many years, while the collection from the corporate income tax dropped by four percent.

The updated statistics show that the unpaid debts by enterprises by February 2012 had increased by 28.5 percent in comparison with the same period of the last year.

Remedy raises doubts

A mini survey conducted on 60 enterprises in Da Nang and HCM Cities by the National Finance Supervision in April showed that the 29 trillion dong bail suggested by the Ministry of Finance may not remedy the businesses’ diseases. The huge package offers tax exemption and reduction, while this proves to be not the biggest problem of enterprises.

The high input material prices, the inability to access bank loans and the weak demand have been pointed out as the most dangerous diseases that need treatment. The inventory index in April rose by 32 percent, breaking the record of 26.2 percent of February 2011. Meanwhile, 63 percent of polled enterprises said they could not access bank loans.

Ha Huy Tuan, Deputy Chair of the National Finance Supervision Committee thinks that the thing that needs to be done immediately is to improve the bank loan access ability.

A senior official of the Ministry of Finance has also said that the monetary policies would be more useful for now than financial solutions.

vietnamnet