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Businesses benefit from Gov’t stimulus package
Businesses have begun to enjoy a 4-percent interest rate subsidy for bank loans as part of the Government’s economic stimulus package to prevent a downward spiral and stimulate consumption.
The move will help businesses get easier access to bank loans with lower interest rates to maintain production in the context of the economic slowdown.
A correct decision
It is worth mentioning that 5 months ago businesses had to pay 21 percent in interest rates for their bank loans, excluding surcharges. Now, with the Government’s decision to provide subsidies to businesses, those that access preferential loans will only pay between 4.5-5 percent in interest rates per year. For other businesses, they will also enjoy lower interest rates of 6-7 percent offered by commercial banks.
In addition, the Government will implement other solutions to support businesses, including reducing taxes and extending deadlines for tax payment.
Businesses are showing their interest in the Government’s decision, particularly for small and medium-sized enterprises that rely on bank loans to maintain production.
Difficulties
However, loan access and low interest rates are just necessary conditions for businesses. The fact is that many businesses, especially seafood, garment and footwear makers, have had their orders cut or cancelled by foreign partners.
Vietnam’s total exports fetched only US$3.8 billion in January 2009, a decrease of 18 percent compared to December 2008. Most key export products saw a sharp fall in volume and value and the downward trend is forecast to continue in the coming months.
As a consequence, many businesses have had to extend work hours, lay off employees and reduce their spending. Seafood processors alone are expected to cut between 20-45 percent of their employees in early 2009.
Cao Sy Kiem, president of the Small- and Medium-Sized Enterprise (SMEs) Association, says more than half of SMEs are coping with difficulties.
According to the Ministry of Planning and Investment, nearly 350,000 new businesses have registered for operation during the past few years, but only just over 200,000 have officially operated and paid taxes to the State. The tax sector also says that most businesses have fulfilled their obligation to the State. In fact, in whatever circumstances, businesses pay taxes to the State, otherwise they are charged with tax evasion. However, many businesses are being affected by the same economic difficulties and not all of them are in danger of losses or bankruptcy as a consequence of their shortcomings.
The most important thing for businesses in the current context is to maintain production and sell the majority of products which are still in stock. Reluctance to deliver goods has resulted in non-payment of debt late last year, blocking access to new loans.
These businesses have no choice but to seek outlets for their stored and new products. But it is not easy to boost exports given the fact that export markets are shrinking around the world.
The Government has adopted solutions to support businesses. They include slashing export tariffs on staples such as wood and wooden products processed from imported wood, and abolishing export tariffs on rice, fertilizer and unprocessed copper, apatite and other minerals.
Opportunities
The Ministry of Industry and Trade (MoIT) has announced a number of trade promotion programmes to support key exports and potential products. Under the programme, businesses will have more opportunities to take part in trade exhibitions and fairs overseas to seek new markets. Meanwhile, foreign businesses will be invited to Vietnam to explore opportunities for cooperation with their domestic partners.
According to experts, businesses specialising in the same product should team up to surmount difficulties. For instance, garment makers facing the risk of laying off a large number of employees should share contracts signed with foreign partners.
Experts also suggest that a potential market of 86 million consumers like Vietnam be fully exploited. The MoIT has recently carried out a programme which encourages Vietnamese people to use locally made products. This is one of the ministry’s efforts to curb the economic slowdown and ensure social welfare.
To carry out the programme effectively, it is necessary to ensure the quality and reasonable price of products. Not long ago, seafood businesses succeeded in expanding the domestic market after failing to carry out export contracts. Most recently, garment makers also reaped initial success in opening retail shops across the country to cater to consumers’ diverse tastes.
Since February 2009, thousands of products and services have enjoyed tax cuts and extended deadlines. The new value added tax (VAT) level which has been halved from the previous 10 percent is considered a practical solution to stimulate market demand, because businesses will lower overhead costs to sell their products. Farmers will also benefit from VAT reductions as they purchase materials for agricultural production at lower cost.
VietNamNet/VOV
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