Rural industrial enterprises seek different kind of state support

Rural industrial enterprises seek different kind of state support

With small production scale and limited financial resources, rural industrial enterprises are seeking adjustments in state support to deal with the heavy losses incurred as a result of the pandemic.

In 2020, the national industry promotion fund helped Thai Nguyen Casting Joint Stock Company in Thai Nguyen Province build a technical demonstration model of casting mechanical parts for export. The project cost totaled about VND70 billion, nearly VND50 billion of which was for an automatic production line.

Company representative Le Quang Hoa said the production line, imported from the Republic of Korea, is more than 90 percent automatic and has a capacity of 800 tonnes of products a month. It can replace about 100 workers, meeting all the requirements of domestic and foreign customers.

The Covid-19 epidemic has presented rural industrial establishments with many problems

However, with its investment dropping amid the Covid-19 outbreak, the enterprise can only maintain about 30-40 percent of capacity, mainly to sustain jobs and income for workers, without taking into account profits.

Moreover, the enterprise is now buying input materials at double the price in 2020, VND16,000 per kg instead of VND8,000-8,500. The price of fero alloys imported from China also rose from VND40,000 to VND80,000 per kg, placing a heavy burden on businesses.

Nguyen Quang Quyen, Director of the 688 One Member Company Limited also said the company cannot sell its bamboo mats. Most of them are kept in storage, not only affecting the cash flow but also the income and livelihood of growers. In order to maintain jobs, enterprises have had to reduce capacity and rotate production. On the other hand, the company's products are facing fierce competition from products smuggled from China that are 50-60 percent cheaper.

Production and marketing difficulties affect many rural industrial enterprises due to their small scale and limited financial resources, making them particularly vulnerable to market fluctuations, such as those caused by the widespread Covid-19 pandemic, and hampering their ability to benefit from support policies.

Le Quang Hoa suggested that instead of reducing corporate income tax, which rural industrial enterprises cannot enjoy when they are suffering losses, the government should drop the 10 percent value added tax down to five percent, and keep implementing the electricity price reduction policy that was in effect in 2020.

A representative of the 688 One Member Co., Ltd also urged state agencies to strictly prevent the sale of smuggled products, simplify procedures for businesses to access capital, and continue to support businesses in upgrading equipment and innovating production.

VietNam Economic News