Vietnam - Life buoy may miss drowning firms

Labour-intensive sector insiders are skeptical whether a recent government support package will hit the mark.

Ho Chi Minh City Leather and Footwear Association general secretary Nguyen Van Khanh said the support, via corporate income tax (CIT) tax reductions and extensions, could fail to help the footwear sector as most firms saw export orders fall 30-40 per cent and their CIT amounts would not be large.

“We will sit with enterprises to listen to their needs and concrete proposals relevant to the government support package,” Khanh noted.

Thien Nam Textile Garment firm director Nguyen Dang Chuc said textile and garment firms need more attention as it was a labour intensive industry.

“It would be most practical for firms if the government applied tax incentives like in 2008 when it halved value added tax (VAT) to 5 per cent,” said Chuc.

Vietnam National Textile Garment Group deputy director Le Tien Truong said the CIT reduction would only help profitable businesses.

Truong said a six-month VAT payment extension could help firms concentrate more on production. However, stepping up production amid dwindling consumption would be unwise.

Textile garment firms said they wanted lower VAT rates to kick up consumption and drain unsold stock.

“Though domestic market is in difficulty, most of our firms have orders in export markets, hence there should be a specific package to help firms weather the storm,” Vietnam Textile and Apparel Association deputy chairwoman Dang Phuong Dung said.

In fact, escalating input costs in previous months made locally-produced materials and accessories more expensive than imported ones. Hence, from early this year many foreign partners shipped materials to Vietnam for local companies to perform export processing. This has cast a remarkable dent on firms’ profits, while local material producers saw rising inventories.

Industry insiders assumed alongside expectations for lower VAT rates further easing the interest rates would be the most substantial support for firms in current context.

Vu Hai | vir.com.vn

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