New Challenges Posed for Enterprises

At the seminar “New challenges, new successes” recently organized by VIB in Hanoi, economics experts believe that without thorough preparation, Vietnamese enterprises are possibly subject to a new bottom of the crisis which is bound to happen in QI 2010.

 

According to Dr. Le Xuan Nghia, National Committee for Financial Supervision (NFS), although Vietnam is believed to get through the “bottom” of the crisis, the economy has indefinite signs. It is difficult to foresee the situation. It is, therefore, necessary to think of a new “bottom”.

Mr Nghia warns that enterprises need to be cautious of a new bottom possibly established in QI 2010. “According to the WB’s broadcast, price in 2010 will not fluctuate as much as it does in 2009, which shows that the global market is still weak. Especially, the restructure wave will make market demand low and unemployment rate increase, etc. Besides, the amount of inventory of Vietnam this year is quite large compared to that of recent years,” analyses Mr Nghia. As such, according to him, the inflation rate will be 6-7 percent in 2009, and 8.5-8.6 percent, in 2010.

 

It is notable that according to Mr Nghia, report of the central bank on the first stimulus package reveals that VND9,000 billion of credit did not get allocated to right borrowers. However, Mr Nghia holds that approximately VND100,000 billion was given to wrong borrowers. The major reason given is that credit standard is not lowered. “Vietnam is facing difficulty, but credit standard remains the same. Healthy enterprises are incidentally supported, in stead of needy ones,” says Mr Nghia.

 

According to Mr Cao Sy Kiem, Chairman of Vietnam Association of Small and Medium-sized Enterprises, a vast majority of Vietnamese enterprises are of small scale, get established in a short time and large quantity during recent time. This is also the reason why these enterprises are not well-prepared in terms of policy, capital, skills, technology, information about the market, and business culture, etc. This is not to mention the fact that inflation keeps rising during the last two years, followed by the economic recession, which makes quite a few enterprises stagger. Even worse, in such a hard period, many enterprises fail to access credit lent at supportive interest rates. “Many enterprises are still unable to borrow supportive credit. In the time to come, this source of credit will be reduced and cut. Enterprises will have to make payment according to market interest rates. They will be then subject to big risks…,” says Mr Kiem.

When old challenges remain unsolved, new challenges turn up. In order to escape challenges, enterprises are in need of support from banks and the government, in addition to their own efforts. Mr Nghia warns that the more serious the crisis is, the more necessary it is for enterprises to access and make their information open to banks so that they can together figure out solutions. “Many enterprises encountering difficulties or being on the verge of bankruptcy find way to “escape” banks. This is a mistake since by doing this, enterprises rob themselves of opportunities to overcome obstacles. Banks do not have information to propose solutions,” says Mr Nghia.

 

Besides, according to former Minister of Trade Truong Dinh Tuyen, it is necessary for Vietnam to restructure enterprises and production ……… Enterprises need to review their viewpoints, strategies and management models. “Don’t hesitate restructuring. There are those who are afraid of restructuring. I believe that it is vital to keep changing and restructuring regularly,” says Mr Tuyen. He thinks that enterprises can have their production process reviewed so as to cut cost or they need to look back at themselves and their position in order to make necessary adjustments. Mr Tuyen also remarks some important points in restructuring the economy.

 

With gradual recovery of global economies, Vietnam will have more convenience compared to 2010. However, with new challenges, Vietnamese enterprises will be subject to numerous difficulties which ask for endeavours of enterprises themselves, support of banks and policies of the state to be overcome.