Oct 16, 2012

Vietnam - Business hurdle debate sets many deputies’ pulses racing

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Removing difficulties for businesses proved to be a hot issue at a plenum of the National Assembly Economic Committee last week in Hanoi.

According to a Ministry of Planning and Investment (MPI) report released at the plenum, in the first three quarters of this year, 51,000 new businesses were set up, down 11.7 per cent on-year. Of these, the number of newly-established property firms reduced by 48 per cent, mining enterprises were down by 46 per cent, and construction and agro-forestry-fishery firms declined 25 per cent.

Businesses which were dissolved or halted operations during that period increased by 6.5 per cent on-year to 203,560 enterprises, accounting for over 30 per cent of businesses registered for establishment so far.

“The number of newly-established enterprises is a virtual figure as many businesses just registered for operations but in fact they have not yet operated,” said Do Hoang Anh Tuan, Deputy Minister of Finance. “Even the number of 471,500 operating businesses is inexact because many of those have halted operations due to losses but yet to register for dissolving.”

Tuan estimated totat accumulative losses of the operating businesses as of September 30 were at least VND250 trillion ($12 billion).

Nguyen Van Phuc, vice chairman of the Economic Committee, said many businesses were worried that many macro-economic targets would not be met this year, including GDP and job creation. Although targets like inflation curbs or trade deficit would be within reach, businesses were still anxious because of economic uncertainties and production standstills.

“In 2013, we should select removing difficulties for businesses as a breakthrough with a focus on small- and medium-sized enterprises, construction, and transport sectors,” Phuc said.

Statistics from the State Bank of Vietnam showed the total capital raised by the banking system increased by 12.7 per cent in the first nine months, while outstanding loans rose only 2.52 per cent.

Nguyen Van Hoa, general director of Saigon Co-op Mart, cited the banking numbers in describing the burden on businesses: “The figures show the banking system is excessive in money, but commercial banks are in race to mobilise capital with interest rates of 13-14 per cent per year.

The question here is that in what channels the money mobilised by the banks is poured while businesses’ access to banking loans remains difficult. This is one of the main reasons for more difficulties burdened by enterprises.”

Than Duc Nam, chairman of the board of members of Cienco 5 - one of Vietnam’s leading firms in transport sector, said 2012 was a very hard year for all businesses. “Access to capital sources are problematic as banking interest rates remain high, at 15 per cent, per year.”

“Reining in inflation and stabilising macro-economy is an important task but we should not spend up to three consecutive years curbing inflation and stabilising the macro-economy because that would lead businesses to death,” Nam said, predicting that difficulties would persist in 2013.

The MPI report forecast that Vietnam’s economy would finish 2012 with 5.2 per cent growth in 2012, consistent with the World Bank’s recently lowered forecast. The MPI also pegged the consumer price index as standing at 8 per cent, per capita income at $1,540, export turnover of $113 billion, import of $114 billion and the creation of 1.5 million new jobs. Last week, the World Bank predicted Vietnam’s economic growth of 5.2 per cent this year, down from 5.7 per cent it forecast in May. The International Monetary Fund, meanwhile, forecast Vietnam’s GDP at 5.1 per cent for the year, down from 5.4 per cent it forecast in July, while the the Asian Development Bank predicted Vietnam’s economy would expand 5.1 per cent this year and 5.7 per cent next year.

Kieu Linh | vir.com.vn

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