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Small businesses bear the brunt of inflation
The recent storm of inflation in Vietnam affected all businesses, but especially small and medium-sized (SMEs) ones.
To survive and develop in these difficult times, they have been struggling to find new ways to develop their business.
The inflation index stayed at a high 27 per cent in July, and the prices of input materials kept on soaring.
However, most businesses have not been unable to increase their prices. Nguyen Huu Hanh, marketing manager of Minh Phat Pharmaceutical Joint Stock Company, said that it was hard to change the price of newly-launched items.
He said customers would not pay more for unfamiliar products.
Therefore, his company had been forced to temporarily absorb losses to retain customers. Food solely distributed by the company is being sold at last year's prices to retain customers.
The rocketing price of ingredients has cost Habada Beer Company turnover and customers - and may even eventually send it to the wall. The cost of malt and hop flowers - key ingredients for brewing beer - rose by more than 300 per cent and 700 per cent respectively.
Other materials necessary for manufacture, such as coal, rice and chemicals, also spiralled upwards.
Nguyen Canh Hua, director of Habada in Bac Giang Province, complained that the company would have to close if it couldn't raise prices.
Careful consideration has to be given to an increase because Habada's beer is aimed at people on low and medium incomes.
Limiting operations can be difficult. The number of employees at AIT Advertising Company is down from 150 to 100.
The company was not getting enough business to keep so many staff on salaries ranging from VND2-3 million (US$120-182) a month - and workers on VND1-1.5 million ($60-90) a month.
Everything has a price. A shortage of workers has made firms less competitive. Hanh, from Minh Phat Pharmaceuticals is worried about his company's image because there is nobody in charge of public relations.
Some pharmaceutical manufactures are planning to fire staff because revenue has fallen by up to two thirds.
Shortage of capital
Business specialist Pham Chi Lan argues that most obstacles stem from shortage of capital. This prevents SMEs from continuing operations or applying new technology.
In addition, lending from banks has becomes more complex because of tight loan policies. The only way out is for business owners to find their own solutions.
The advertising firm AIT is now accepting smaller contracts and acting as sub-contractor for events with low profit margins just to keep business ticking over.
However, the pressure is heavier on construction enterprises. Hoa Son Investment and Construction Company, for example, has to choose customers who can pay for construction.
However, the almost 62 per cent increase in the cost of imported gasoline and a 14 per cent increase in the cost of building materials makes them wary of making bids.
VNS
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