Businesses run out of cash, directors put on tenterhooks
VietNamNet Bridge – Directors have been worried to death because their businesses have cleaned out, while they need to spend more at the end of the year.
Where’s the money gone?
Tran Anh, Director of the Hoang Mai Company in Hanoi, said he could not understand where the money has gone.
“The business account is empty. Clients have not made payment. We ourselves still owe money to some material suppliers. Meanwhile, my workers are expecting the Tet bonuses,” Anh complained.
Anh’s company is not alone. Doan Trong Ly, President and General Director of the Livestock Breeding, Processing and Import-Export Company, said all businesses now complain about the money exhaustion.
“The problem is that businesses cannot access bank loans, cannot sell their products and cannot make profits,” Ly said.
In the husbandry industry, he said, farmers have to spend 45,000-55,000 dong to create a kilo of live pork, but they can sell at 42,000 dong per kilo only instead of 60,000 dong in the past. As a result, farmers have given up farming, while processing enterprises have been encountering big difficulties due to the unsalability.
“I know a big food processing company with the total assets of 130 billion dong. Its four food shops have been shut down because of the low sales. The owner of the company is considering leasing the retail premises, but he still has not found clients,” Ly said.
“How can businesses arrange money if they cannot sell their products?” he added.
Businesses are both creditors and debtors
Minister of Industry and Trade Vu Huy Hoang affirmed at important business forums that the inventory index tends to decrease, which is really good news for the national economy.
However, a lot of enterprises still have high inventories and low liquidity.
In the real estate sector, Quoc Cuong Gia Lai Group is a typical example. Its finance report showed that by September 2012, it had had only 39 billion dong in its account, while the total short term debt had reached 1931.4 billion dong, and the inventories’ value had reached 3511.7 billion dong. It’s obvious that Quoc Cuong Gia Lai would not be able to pay debts if cannot sell its products, because the balance of 39 billion dong in account is really a modest sum of money.
According to the Vietnam Association of Seafood Exporters and Producers (VASEP), 2.5 kilos of catfish materials is needed to make one kilo of catfish fillet. With the current catfish material price at 22,000 dong per kilo, enterprises would have to pay 55,000 dong in materials for a kilo of catfish fillet.
However, since the export markets have been narrowed in the global economic crisis, enterprises have to sell finished products at 2.2-2.4 dollars per kilo, or less than 50,000 dong, lower than the production cost. Meanwhile, the unsalability has cost enterprises 700 dong per kilo more.
Businesses understand that they sell products at a loss, but they still have to do that. If not, their accounts would be empty and they would not have cash to cover the basic expenses to maintain enterprises.
Tran Anh Vuong, Deputy Chair of the Hanoi Young Entrepreneurs’ Association, said enterprises now are both big creditors and debtors. Big enterprises and contractors are owing to small businesses and contractors. Meanwhile, the big enterprises and contractors don’t have money to pay debts, because they still get paid from their partners, possibly bigger enterprises, local authorities or state funded projects.