Should unprofitable businesses be saved or abandoned?
VietNamNet Bridge - The Vietnam Chamber of Commerce and Industry (VCCI) has released a report showing that 70 percent of private businesses have not made profits for many months.
The businesses make up 50 percent of the country’s GDP. At least 96 percent of them are small and very small businesses, while the remaining 4 percent are medium and large sized companies.
The survey by VCCI conducted in April 2015 showed that small and micro businesses still have revenue, but they have fewer jobs; therefore, their profits have decreased dramatically, which has forced them to cut their labor force. Nearly 32 percent of businesses have halted operations.
Nguyen Tien Dung, director of Thy Duy Packaging Company in HCM City, said the number of workers in his business had been cut by half due to a decrease in orders.
Three years ago, Thy Duy ran at full capacity with 20 workers. But now it has only seven workers, while only three out of its 5 printing production lines work at a moderate level.
Nguyen Van Tinh, director of Nguyen Van Tiep Company in Quang Nam province, a fine arts trader, complained that the number of orders has dropped by 30 percent as his products are less competitive with products of the same kind in the north.
Many businesses are trying to maintain business and make modest money to compensate laborers.
Cu Van Thanh, director of Luong Van Quoi Company, a coconut processor in Ben Tre province, said the biggest problem for small businesses is the inability to access bank loans.
The businesses do not have mortgaged assets to borrow commercial loans, and they do not have business performances good enough to borrow money without collateral.
Meanwhile, a survey of credit demand from small- and medium-sized enterprises conducted by the Central Institute of Economic Management (CIEM) found that 50 percent of businesses did not apply for loans because they had no demand.
The figure showed that businesses do not intend to expand their production at this moment because of the low purchasing power.
Bui Kien Thanh, a renowned economist, commented that the limited capability and the small scale of the private economic sector was the biggest problem of Vietnam’s economy.
Businesses act as the backbone of the national economy. If they don’t intend to expand the production, then serious problems exist.
“The number of private unprofitable businesses is on the rise despite the government’s efforts to develop the private sector,” he commented.