VietNamNet Bridge – Thirty three percent of businesses cannot afford the current long term lending interest rates of 12-13 percent and higher. One third of enterprises had their profits decrease in the first quarter of the year, a Vietnam Chamber of Commerce and Industry’s (VCCI) survey has found.

 

High capital costs – the biggest obstacle

 
When asked about the conditions to serve production and business in the first quarter, only 12 percent of enterprises said that conditions got better. Meanwhile, 52 percent said conditions remained “normal”, 25 percent did not have clear feelings, and 11 percent affirmed conditions worsened.

 

Especially, 18 percent of polled enterprises said their business results were worse in the first quarter.

 

Businessmen said that the higher demand in both the domestic and foreign markets, and updated market information and technologies have had positive impacts on their businesses. Meanwhile, in comparison with 2010 there have been no big changes  businesses’ feelings towards land access and conditions of transportation.

 

However, the above said positive factors cannot “compensate” for the three big problems: high capital costs, lack of materials, and shortage of skillful laborers.

 

Especially, one-third of enterprises said capital access was the biggest obstacle to them.

 

The higher input costs have led to higher production costs. In such a context, 43 percent of enterprises had to raise the sale prices of their products. Meanwhile, 43 percent of enterprises could not raise prices because they had to compete with rivals. Especially, 14 percent of enterprises even had to slash sale prices.

 

Though enterprises tried to increase the efficiency of  machinery, increase productivity, and reduce stocks, 33.3 percent still saw their profits decrease.

 

Reducing the production costs were the goal that 75 percent of businesses strived to, but only 52.6 percent could reach the goal.

 

12-13 percent interest rates unaffordable to businesses

 

The VCCI’s survey found that high lending interest rates are the biggest worry for businessmen. Up to 85 percent of Vietnamese enterprises have to borrow money at interest rates of 12-13 percent and higher, which are negatively impact the businesses’ profitability.

 

Only 19 percent of enterprises think that these are reasonable interest rates. 33 percent said they cannot bear the interest rates for a long time.

 

VCCI has pointed out that such overly high interest rates will make businesses hesitant to make deep investments for long term development. Businesses tend to make short term investments to seek high and immediate profits.

 

84 percent of enterprises shared the same opinion that the most reasonable interest rates would be 9-10 percent, while 89 percent said these are “acceptable” interest rates.

 

Enterprises hope that the government will hould focus on stabilizing the macro economy in the time to come. Up to 40 percent of enterprises said they were influenced by the macroeconomic instability. Only 18.8 percent of enterprises said the policies on stabilizing the national economy applied by the government have had good impacts on them.

 

Dr Nguyen Dinh Cung, Deputy Head of the Central Institute for Economic Management (CIEM), said that the government needs to send a clear message that in the long term it is committed to stabilizing the macro economy in order to make businesses feel secure enough to continue their business operations.

 

Meanwhile, commenting about the survey’s result, analysts have recalled the happening in 2008. In that year, enterprises affirmed that they could make profits of 15 percent at maximum, while the interest rate was high at 20 percent per annum. If the enterprises’ words had come true, Vietnam would have seen the negative economic growth. However, in 2008, Vietnam still achieved high growth rate.

 

Therefore, the analysts have warned that if enterprises exaggerate the actual difficulties, this would put a unnecessary pressure on the government’s operation.

 

Pham Huyen