HCM City processing firms grow while others lack capital

HCM City processing firms grow while others lack capital

The growth rate of industrial production in HCM City was 4 per cent for the first four months of this year, only slightly higher than the 3.9 rate for the same period in 2012, according to the city's Department of Industry and Trade.

The city posted 3.8 per cent growth in its processing industry, with the highest rates in the plastics and food processing sectors, beverages, garments, footwear, chemicals and chemical products.

Growth declined in the sectors of mining, tobacco, electronics, automobiles and machinery and equipment, with the mining sector achieving 90.9 per cent of the growth recorded during the same period last year.

In the first quarter, nearly 5,000 HCM City-based businesses suspended operations, or equal to 63.8 per cent of the number of newly registered businesses for the same period.

Compared to other localities nationwide, HCM City had the highest number of private businesses facing bankruptcy in the first quarter of the year.

The number of private firms in HCM City that suspended operations was 5.2 per cent higher than the number of newly established companies.

According to the city's Statistics Department, most of the new businesses in the first quarter were in the service sector, while new businesses declined substantially in the industrial and construction sectors compared with last year.

Many manufacturing and trading companies still faced difficulties, such as capital shortages, high volumes of inventory and high input costs.

As a result, many businesses have cut staff and lowered production activities. They have also tried to balance inventories while eliminating unnecessary intermediary costs.

Nguyen Van Sinh, director of Nguyen Sinh Co Ltd, said the company's sale of supply materials and equipment for the engineering sector had dropped sharply, despite the company's big discounts.

"Currently, we are only working at a low level, processing orders made by regular customers," he said.

Low purchasing power and rising production costs, have caused difficulties for manufacturing and trading enterprises.

Many businesses have been focusing on their brand names while cutting costs and raising labour productivity.

More liberal policies

Nguyen Van Lai, director of HCM City's Department of Industry and Trade, said that capital shortage was the biggest challenge facing businesses.

He said that only 30 per cent of small- and medium-d enterprises in HCM City were able to access bank loans.

The remaining 70 per cent had to take out loans from other sources that required high interest rates.

This situation had led to low credit growth and declining effectiveness of the banking system, as well as rising bad debt, he added.

Huynh Van Minh, chairman of the HCM City Business Association, said many banks were still offering loans at high interest rates.

In addition, banks were continuing to ask for mortgages as collateral from businesses. This requirement was especially difficult for small- and medium-d enterprises, Minh said.

vietnamnews