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Credit policy hampering private businesses
Private businesses, which contribute 41.3% of GDP, are being discounted by policy makers. A lot of private businesses are facing bankruptcy, which could result in high unemployment.
In the context of prolonged high inflation and unstable macroeconomic conditions, attention is being focused on the state-owned sector, while private businesses seem to be being ignored by policy makers.
While the VND is in short supply, and it is difficult to purchase dollars, only big state-owned enterprises that make key products are prioritised in purchasing dollars and accessing bank loans. As private businesses are not listed among the priority subjects, their problem of lacking capital has become more and more serious.
Cao Si Kiem, Chairman of the Vietnam Association of Small- and Medium-sized Enterprises, said that most of the members of the association are facing big difficulties.
Kiem said that in good business conditions, businesses would get the profit of 8-12% on average. Meanwhile, the lending interest rates have reached 21% per annum.
He said that if the interest rates go up to overly high levels, businesses will not have capital for production and investment. They will have to either push sale prices up or incur losses. This will lead to the purchasing power decrease, which will make enterprises’ turnover decrease. Businesses will not be able to pay debts and go bankrupt.
Experts have pointed out that the number of labourers working in the business fields that the private economic sector has advantages in is tending to decrease, while the Vietnamese workforce increases by 1.5mil people a year. Meanwhile, the private economic sector is considered the place which can create most of the jobs in the national economy.
The 2007 annual report released by the Vietnam Chamber of Commerce and Industry (VCCI) recently, showed that there have been reductions in the numbers of small enterprises in the fields of construction, foodstuffs, textiles and garments and tourism. VCCI has reported the highest ratio of abandoned enterprises in the field of construction, production and foodstuff processing (30%), and then in garments and textiles and tourism (10%). Meanwhile, these are considered the fields that create the most jobs.
A survey conducted by the Central Institute for Economic Management under the Ministry of Planning and Investment showed that though small enterprises grow rapidly in number, only a few enterprises can expand their business scope, while others tend to narrow their scales.
Difficulties in accessing land and credit sources have been cited as the major obstacles for small enterprises. The overall strategies on the development of power, coal and cement industries have turned private businesses aside. Therefore, private businesses have become more inferior to state-owned enterprises in the competition between enterprises.
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