Local
enterprises’ dramatic SOS has pushed the government to roll out a major rescue
package. However, it is unclear whether the rescue package will actually keep
firms afloat.
"These
measures could have saved my firm if they were applied last year.”- Nguyen Tao
Chuyen Director of Hanoi-based NTC Vietnam Joint Stock Company
Nguyen
Tao Chuyen displayed a cool attitude to news that small- and medium-sized
enterprises (SMEs) like his would be supported by a major government bailout
package.
Chuyen,
director of Hanoi-based NTC Vietnam Joint Stock Company - trading in wood,
vegetable and fruit products, in March shut down his last processing workshop.
“We have no output market and no capital, while the lending rate remains high,”
he said.
The
plight of Chuyen’s company is shared by Nhat Anh Joint Stock Company owned by
Nguyen Ngoc Thuyen, Chuyen’s younger brother. Nhat Anh, which produced
tissue-paper, shut down in February.
While
the two directors share the same predicament, neither thought the government’s
package would come to much. Chuyen said it was a case of too little, too late:
“These measures could have saved my firm if they were applied late last year.”
A
dark reality
These
two companies are among 5,310 enterprises in Hanoi having gone bankrupt or
stopped operations due to economic woes in this year’s first quarter, up 87 per
cent against the same period last year, the Hanoi Department of Tax reported.
Minister
of Planning and Investment Bui Quang Vinh said economic stagnancy danger signs,
such as high inventory levels, rising unemployment and negative credit growth
were now visible.
The
government last week took action to help ease domestic enterprises’ financial
woes. The bailout package, worth VND29 trillion (nearly $1.4 billion) according
to the Ministry of Finance’s (MoF) calculations, includes tax relief mixed with
expanded public spending, price management measures and cuts in administrative
procedures.
Specifically,
the package is headlined by a 30 per cent reduction of enterprises’ corporate
income tax (CIT) in 2012 for labour-intensive enterprises in the agricultural,
textile and garment, and footwear sectors, amounting to a VND4.05 trillion ($195
million) cushion for firms.
The
package also covers a six-month payment delay for the value added tax (VAT),
valued at VND12.3 trillion ($591 million) for these types of enterprises and a
nine-month delay for the CIT worth VND3.5 trillion ($168 million) for cement,
steel and transport enterprises who have yet to pay CIT for 2011 or earlier
periods.
Moreover,
public spending solutions worth VND5.66 trillion ($272.5 million) and
road-maintenance fee collection delays worth VND3.2 trillion ($154 million) are
in the mix. Enterprises operating in the commercial and service sectors could
have land rental payments delayed by up to 12 months.
However,
the MoF will have to seek National Assembly approval for the proposed 30 per
cent reduction in CIT in 2012, as it requires amendments to the Law on
Corporate Income Tax.
Prime
Minister Nguyen Tan Dung required the ministries of Finance, Industry and
Trade, Agriculture and Rural Development, Planning and Investment (MPI), and
the State Bank to execute this resolution.
“We
want to help enterprises have more capital for production, address high
inventories and ensure big markets for products,” said Vu Nhu Thang, head of
the MoF’s National Institute for Finance, who helped draw up the package.
Move
off target
Vietnam
Association of Accountants and Auditors chairman Dang Van Thanh said the CIT
reduction could be useless for many enterprises as they had no income to pay
CIT.
The
same was true for VAT payment delays, because enterprises already suffered from
output market shortages and high inventories. “If enterprises cannot sell
products, the VAT payment delay is meaningless,” said Ta Phuoc Dat, deputy
general director of Saigon General Service Corporation.
Pham
Thi Lan Huong, head of the Central Institute for Economic Management’s (CIEM)
Macroeconomic Policy Committee, said CIT payments needed to be reduced more
sharply rather than delayed, because enterprises would have to pay bank
interest to pay CIT.
“Moreover,
the CIT delay worth $168.2 million is too small as compared to the VAT delay
worth $591 million. Meanwhile, many enterprises have no income to pay the CIT.
Thus, the CIT delay will not be able to produce big results,” she said.
However,
Vietnam Steel Association chairman Pham Chi Cuong saw the package as good news.
“The
package with more public spending will result in an increase in the demand for
steel in Vietnam. At present, local steel manufacturers have been unable to
sell their inventories, which is 20 per cent higher year-on-year,” Cuong said.
Le
Quang Hung, chairman of Saigon Garment Manufacturing Company, said the CIT
delay would help his company save about $48,000 each quarter. “If we don’t have
to pay VAT soon, we will have an additional $963,000 for production within six
months.
Not
all smelling of roses
Vietnam
Chamber of Commerce and Industry (VCCI) chairman Vu Tien Loc, however, offered
some words of caution. He said though the package was helpful to enterprises,
the government needed to closely control rising input costs like electricity,
power and coal. Also, lowering of lending rates needed to continue.
Last
week, the State Bank’s Circular 14/2012/TT-NHNN on lowering the lending
interest rate took effect. Under which, the highest lending rate for four
prioritised sectors including agricultural and rural development, export,
supporting industry and SMEs are no higher than 15 per cent, per year.
The
prime minister said the government’s first monetary policy priority was “to
lower lending rates and facilitate enterprises’ access to bank loans.”
But
Chuyen and Thuyen said the 15 per cent lending rate remained high and access to
credit was narrow due to complicated lending procedures. They said the
government’s most important bailout solution now was reducing taxes to help
consumers benefit from cheaper-price products, and then enterprises would be
able to sell off their inventories faster.
Figures
hit home
The MPI
in early May said the first four months of 2012 saw nearly 18,000 enterprises
go bankrupt or stopped operations, up 9.5 per cent against the same period last
year. Many of them are in wholesale and retail (5,300 enterprises),
construction (3,100 enterprises), manufacturing and processing (2,900
enterprises) and transport (1,000 enterprises).
HSBC
Vietnam last week issued its Manufacturing Purchasing Managers’ IndexTM (PMITM)
survey conducted in April, 2012 over 400 Vietnam-based manufacturing companies.
The MPI reported the inventory level in Vietnam in this year’s first four
months grew by 35 per cent year-on-year, far higher than the 14.6 per cent
year-on-year of last year’s same period.
Meanwhile,
the industrial production index rose only 4.3 per cent year-on-year in this
year’s first four months against the corresponding periods of last year (7.9
per cent) and 2009 (10 per cent).
Thanh
Thu | vir.com.vn
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