Vietnam - Arid business climate burns firms

A hostile business climate has knocked scores of firms sideways.

Around 170 Hanoi-based firms filled in procedures to go bankrupt in the first two months of 2012 parallel to a decline of 2.6 per cent in new enterprise numbers and 36 per cent in new committed capital against the same period in 2011, according to Hanoi Planning and Investment Department deputy head Nguyen Van Tu.

“This year is different from previous years when few firms asked to dissolve in early year,” said Tu.

The number of firms going bust in Ho Chi Minh City was even bigger with more than 370 firms shutting up shop in the first two months.

On a national scale, the country’s industrial production index (IIP) hiked just 3.9 per cent in the first two months, a rather low level according to Ministry of Industry and Trade’s Planning Department deputy head Nguyen Thanh Hoa.

“Usually, the mining industry’s IIP grows at slower pace than that of processing industry, but things were reverse in this year first two months, indicating firms’ current critical situation,” said Hoa.

Economists assumed development perspectives might worsen this year and a similar scenario like in black 2009 might become a reality.

“2012’s first quarter is even tougher than 2009’ first quarter,” said Le Dinh An, former director at National Centre for Socioeconomic Information and Forecast.

Businesses hold the same view. A Nielsen - a global leader in information and measurement - recent survey showed that 66 per cent of business leaders said Vietnam’s business conditions became worse compared to a year ago and over 30 per cent of surveyed firms believed their performance would further deteriorate within the next six months to one year.

Inflation, competition pressures, dong depreciation and slowing GDP growth are firms’ prime concerns. “Policy support to help firms abate input costs is urgently needed,” said Tu, adding that it was almost impossible for firms to run effectively with current 16-20 per cent lending rates.

“Last year, the new policy on land rent had exaggerated firms’ burdens since some firms had to pay the amount 10-12 fold higher than in 2010,” said Tu.

Ha Nguyen | vir.com.vn

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