In the first six months of 2012, as many as 1,065 enterprises in Ho Chi Minh City ended operations while other thousands are now facing bankruptcy, especially real estate firms. In this context, the municipal authorities are enthusiastically seeking powerful solutions to shore up troubled businesses.
According to local businesses, primary causes for ongoing hardships are very tight access to bank credits, falling FDI capital, weakening purchasing power and shrinking markets. Recent corporate bankruptcies are mostly small- and medium-sized businesses established at the peak of the sectoral growth circle to seek quick and certain profits. Consequently, when the market is volatile, a series of corporate bankruptcies will happen.
Ms Quach To Dung, Deputy Director of HCM City Department of Industry and Trade, said the biggest shortcoming is that so few businesses are enjoying low-rate loans. Indeed, Circular 14 of the State Bank of Vietnam (SBV) states that only companies operating in four priority sectors (agriculture and countryside; export; small and medium production; and supporting industry) are eligible to borrow money at 12 percent per annum while the rest is still subject to exorbitant interest rates. But, in reality, companies in these four industries have not enjoyed the favour of Circular 14. "Businesses are still finding hard to access capital. In addition, a very small number of businesses can borrow at low interest rates and a vast majority are still paying 16 percent or higher per annum for their lending,” said Ms Dung.
An official from Saigon Agriculture Corporation said animal husbandry and agricultural production are up the creek because pork prices dropped significantly following the information that pigs are contaminated by the use of banned lean-gaining substance. Hence, the authorities had to strengthen inspection to help farmers out of trouble. Besides, commercial banks need to create conditions for companies and farms to access capital for animal husbandry and agricultural production.
Mr Huynh Van Minh, Chairman of Ho Chi Minh City Business Association, capital shortage is critical and the Government essentially lowers interest rates quickly, facilitates businesses to access loans, and stabilise and develop production and business activities.
A representative from the Ho Chi Minh City Real Estate Association said real estate companies are now still on the horns of a dilemma because commercial banks require very strict conditions. If there are no troubleshooting directions for debt settlement from the State Bank, businesses will not be able to access bank loans while the system is in excess of capital.
To troubleshoot capital shortage and capital inaccessibility, under the direct instruction of Municipal People’s Committee, the SBV - HCM City Branch has programmes to stimulate credit growth. And, after there is a list of local businesses in need of loans, the SBV will direct local commercial banks to send staffs to pending borrowers to assess their performance and health. At the same time, it will inform the list of capital-short companies to competent organs.
In a bid to support local businesses, the Department of Industry and Trade has opened campaigns to seek out markets for local products. It gives priority to expanding traditional markets and small shopping centres while companies are advised to directly bring products and services to consumers. By combining the efforts of the business community, banks and local authorities, sales of some essential products, particularly stockpiling, are improved.
Like the Department of Industry and Trade and the State Bank - HCM City Branch, the tax sector also collected opinions of taxpayers in 2012 in an attempt to have local businesses to deal with tax-related issues. And, recently, the Municipal People’s Committee has considered lowering 30 percent of corporate income tax payable in 2012 for small and medium enterprises, exempting value-added tax, personal income tax, and corporate income tax in 2012, among others.
Bich Thuy
Vietnamese
