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Businesses in crisis: Get orders or perish
The government’s business assistance packages have never been so attractive with interest rate subsidies, tax payment delays and debt freezing. However, businesses will never get the preferential loans if they cannot get contracts.
Seeking a way out
Le Tuyet Mai, Assistant to the Director of Thuong Dinh Shoes Company, said that the company’s leadership well understands that it will not get any bank loans until it can get orders.
Mai said that her company attends several trade fairs and exhibitions every year in foreign countries to seek export contracts. Thuong Dinh’s main export markets are the EU, Cuba, Japan and Africa. The company promoted exports to the US last year, but then the financial crisis broke out in the country.
As export orders have dropped by 30-50%, the company has decided to target the domestic market. However, Mai said that the possibility of offsetting the losses in export markets with sales in the domestic market is not high. The domestic market in January and February consumed 200,000 pairs of shoes each month.
Mai said that as the competition has become fiercer, enterprises all have to cut production costs and diversify product designs. Thuong Dinh expects to have 4-5 more new models, and set up more sale agents in order to boost sales.
Animal feed producers have also been heavily affected by the global economic recession. Doan Trong Ly, Chairman of Aprocimex, complained that he has had to move heaven and earth the last several months to find orders. The company plans to export farm produce to Africa. However, Ly said that Africa proves to be a very small market, and it is really risky to export products to the market. He is not sure if he can get payments for exports after the exports are delivered.
As for garment companies, the Vietnam Textile and Apparel Association has reported that 90% of enterprises have been either operating perfunctorily or have halted production. Only a few big brand names, including Garment Company 10, Viet Tien and Nha Be, have got contracts, as they have big loyal clients.
Le Tien Truong, Deputy General Director of the Vietnam Textile and Garment Group, said that the group has called on member companies to share contracts. Thanks to this, Duc Giang and Thanh Cong Companies have got orders to maintain their production.
Mechanism open, but conditions strict
Luu Tien Long, Director of the Hanoi Department of Industry and Trade, who has returned from tours of businesses, said that businesses have been facing great difficulties. Previously, they got a lot of export contracts, but they could not access bank loans as the government tightened the monetary policies to fight inflation. Nowadays, when bank doors are open, businesses cannot get contracts.
Tien, Head of the Business Management Division under the Hanoi Management Board of Industrial Zone and Export Processing Zone, said that enterprises still have to manage themselves to survive, adding that very few businesses are eligible for tax incentives.
Mai from Thuong Dinh Company said that the company well understands that it is necessary to carry out trade promotion activities to get orders. However, the company has not received any invitation to join any trade promotion programme funded by the state.
Dao Trong Ly said that though interest rates have been decreasing, the lending interest rate at 7% per annum on average remains very high for businesses. Meanwhile, it is also necessary to reduce the VAT for input materials of many industries. The VAT for materials for making animal feed, for example, remains at 5%, while it should be slashed to 0% according to Ly.
Local departments of industry and trade are seeking to understand the difficulties of enterprises in order to help them survive and develop. The Hanoi Department of Industry and Trade has just kicked off a programme to learn about the trade promotion demands of businesses.
However, measures to help businesses seek the way out remain on paper.
Pham Huyen
vietnamnet
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