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Coping with inflation: cutting jobs, narrowing business scale
According to the Vietnam Business Administrators’ Association, inflation will put 70% of enterprises at high risk of bankruptcy if they cannot find capital, restructure production to reduce costs.
Tran Thu Huyen, Director of Asia Paint, said that her company has had to cancel a project on building a resort. Duc Viet Foodstuff Joint Stock Company has had to cancel a project on making fast food, and narrow the scale of its production of sausage.
Foodstuff companies breeding pigs themselves
Bui Duc Huyen, Director of Viet Tin Nutrition Joint Stock Company, said that his company has to hire breeding facilities to breed 3,000 pigs itself instead of relying on outside suppliers. Huyen said that this proves to be the best solution for now, as the prices of corn and other materials have increased by 100-300%.
Mai Huy Tan of Duc Viet Foodstuff Company said the company has to find different suppliers who can provide meat at lower prices. Moreover, it is promising attractive bonuses in order to encourage sales agents to make payments sooner, which helps the company reduce the volume of its bank loans. Also in order to get rapid capital turnover, Tan’s company now focuses on making high-profit products, not products that bring low profit or have low demand.
Tan said that the said measures have helped his company maintain normal production, while it does not have to cut jobs or cut staffs’ salaries.
Huyen of Asia Paint said that previously, the company made products right when it got orders from clients. Nowadays, the company only kicks off production when orders are big enough to match the factory’s capacity. Huyen has also decided to reduce the number of vehicles carrying goods from five to three, and maximise the circulation time of every vehicle.
The company has also cut a number of staffs in the administration division. “After cutting several jobs in each division, we raised the salaries of the remaining staffs and we have got a surplus; not a big sum, but very useful in the current difficult conditions.”
Comprehensive measures needed
Tan of Duc Viet said that while businesses and people have to tighten their belts to survive the current difficulties, state-owned enterprises and state agencies are throwing the state’s money about. He said that Hanoi authorities were allowed to re-brick the pavement of Hoang Hoa Tham street near Bach Thao park, though there was no problem with the pavement.
Nguyen Quang Thuat, General Director of Foodinco Investment and Import-Export Company, said that state-owned economic groups and general corporations now use 60% of the total investment capital of society, while they create 40% of GDP only.
Thuat said that the state’s policies in the recent past have not been consistent. While the maximum lending interest rate is set at 21%, businesses still have to pay more to get bank loans. While the State Bank is trying to maintain the forex trading band at +/-2%, businesses still have to purchase foreign currencies at prices 10 times higher than the official rate.
The Vietnam Business Administrators’ Association has asked state management agencies to reconsider the mechanism on official development assistance (ODA) capital allocation. Currently, ODA capital goes to state-owned enterprises only, while the private sector, which effectively uses capital, cannot access ODA sources.
VNN
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