Enterprises believe the business climate will be difficult again this year and most of them are content to just survive rather than expand.

This was according to the Viet Nam Chamber of Commerce and Industry (VCCI) survey of more than 600 enterprises in December 2012, announced in its Enterprise Annual Report launched yesterday in H Noi.

The chamber's survey found that 10.4 per cent of enterprises might narrow down their operations and 1 per cent might dissolve or go bankrupt because they could not find markets for their products, pushing up inventories.

High inventories were the major concern of 73 per cent of enterprises.

About 5.7 per cent of enterprises said they had to halt operations last year for an average of three months.

High interest rates remained a barrier to enterprises accessing credit. Nearly half of the surveyed enterprises paid 14 per cent per year, high in comparison with other countries in the region. Around 58.9 per cent said they would fall into difficulties if they had to pay 14 per cent.

The chamber said three quarters of surveyed enterprises expected loan interest rates to be cut to 8-9 per cent per year.

"2012 was a really difficult year for enterprises, reflected in a reduction in the number of new enterprises and total registered capital," the report said.

As of the end of 2012, the number of newly established enterprises was estimated at 68,874 with a total registered capital of VND467.265 trillion (US$22.25 billion), representing falls by 9.9 per and 9 per cent respectively over 2011.

The number of enterprises which were dissolved or halted operation increased by 6.29 per cent, reaching 9,355 units last year, especial those in finance and banking and real estate sectors.

During the past 10 years, the number of enterprises increased five-fold from 63,000 in 2002 to more than 312,600 in 2012.

However, the development of enterprises in the 2007-11 period relied much on the growth of capital source, resulting in inefficiencies, which reflected instabilities after the country's entry to the World Trade Organisation.

Market access capacity

The report studied the market access capacity of six industries of fishery processing, mechanics, beverage, retail, advertising and trade promotion.

According to Pham Thi Thu Hang, chamber general secretary, the market access capacity of enterprises remained simple, and some inappropriate to the target markets, which could be an explanation for the increasing inventories.

She said the price competition, together with the dispersion of competitiveness, would impact the sustainable development of the fishery sector. The chamber forecast fish and seafood export turnover this year might not to equal 2012 at around $6-6.2 billion.

The mechanics sector was found to meet only 20-25 per cent of the domestic market while the rate was expected to be to 40-60 per cent. According to Hang, outdated technology together with the lack of co-operation among mechanics enterprises and human resource resulted in the low competitiveness of the sector.

Hasten reform

Regarding production and distribution of beverages in the domestic markets, the chamber said enterprises should focus on enhancing product quality, expanding the distribution system and enhancing promotional activities.

The Viet Nam economy would continue to encounter present difficulties such as high inventories and bad debts along with the impacts of world economy changes, according to the report. The economic growth rate was forecast at around 5.5 per cent this year.

The nation would still prioritise to stabilise the macro-economy and tackle difficulties of the financial system.

"The most essential job is to hasten the restructuring of the economy this year and determination is needed even in years 2014 and 2015," the report said.

Or else, the nation would be at risk of missing out on the forthcoming growth period.

According to senior economic expert Pham Chi Lan, it would also be time for enterprises to restructure themselves to cope with rapid integration by 2015 when the ASEAN Free Trade Area was scheduled to be formed.

Expert Vu Quoc Tuan urged the Government to provide greater support to enterprises, especially those of small and medium sizes, which were burdened by lack of capital and complicated administrative procedures.

Source: VNS