Vietnam - 12,000 businesses died, others dieing, shouting for help

VietNamNet Bridge – “To be or not to be” is the question that many young entrepreneurs have raised for themselves, after a long period of struggling to survive the difficulties.

Hoang Van Phuong, 33, sits grasping his knees watching TV all day in his three storey house in Phung Khoang village in Hanoi. The former director of a private business tries to kill time after he shut down the business just prior to Tet.

After two years of running the company, specializing in motorbike part distribution, Phuong quietly shut down the business because he could not recover debts. The partners, according to Phuong, either did not pay debts as they also stopped their business, or deliberately delayed the payment.

This was for the second time in the last four years that the young entrepreneur shut down his business and becomes redundant.

Earlier this year, the Hanoi Job Center reportedly paid 60 million dong in unemployment insurance to a special person. She was the director of the two companies in Hanoi; the representative of a Hong Kong based forwarding company. The dramatic fall of the revenue of the company prompted her to leave the post. After 10 years of working as a manager, Tran Thi Le, 41, has become redundant.

A lot of small and medium enterprises have got exhausted. And not only small businesses, a lot of big guys--especially the ones in real estate and securities sectors have been facing big difficulties.

The stories about two young directors can show the big obstacles Vietnamese businesses are meeting. They are getting more and more weakened due to the prolonged macroeconomic instability.

Cao Sy Kiem, Chair of the Small and Medium Enterprises’ Association, said he does not know the two young directors personally, but he understands their situation. Kiem said that this is the common situation of small businesses which account for 97 percent of the total enterprises in Vietnam.

Kiem said that the high inventory index, the decreases in industrial production, the sky high bank loan interest rates, and the frozen real estate market all have put a heavy burden on businesses and led to the bankruptcy of up to 40 percent of Vietnamese enterprises.

Tran Dinh Thien, Head of the Vietnam Economics Institute, also said that he can see worrying problems for the “health” of enterprises. While citing official statistics as saying that 12,000 businesses got dissolved or bankrupted in the first three months of the year, Thien said that in such circumstances, the number of businesses to be bankrupted would increase sharply in the time to come.

However, Thien said, the more worrying problem now is that the majority of enterprises have to cut down the production more sharply, which Thien said the “part of the iceberg under water.” It is regrettable that there has been no official report showing the real situation of the iceberg.

Thien has emphasized that the main tasks for now not only to curb inflation, but to rescue enterprises as well.

When Governor of the State Bank Nguyen Van Binh took the office last June, he understood that he has to face a dilemma. The State Bank needed to maintain high interest rates to help restrain the high inflation. However, Binh well knows that such a policy would put a heavy burden on enterprises.

According to the National Financial Supervision Council, the bank loan interest rates of 20-22 percent per annum in Vietnam are overly high, if noting that the interest rates are just 10 percent in India, 7.3 percent in the Philippines, 6.9 percent in Thailand, 6.6 percent in China and 5.4 percent in Singapore.

Meanwhile, Dr Nguyen Thi Mui from Vietinbank said only 30 percent of small and medium enterprises can access bank loans.

Source: TBKTSG

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