Enterprises’ big debts, large inventories, declining production
capacities growing and growing number of closures and bankruptcies have
illustrated a gloomy business prospect. Thanh Thu takes a closer look.
Vietnam Institute of Economics
director Tran Dinh Thien’s gloomy debt figures of real estate businesses and
the concept of ‘property inventory’ caught special attention from participants
at a conference on Vietnam’s economic situation held last week in Hanoi.
Thien said 69 property companies
listed on Vietnam’s stock market aggregately owed VND67 trillion ($3.22
billion) to banks by late 2011, with annual interest of VND13.4 trillion
($644.2 million). In the fourt quarter of last year, the companies’ short-term
debts amounted to VND26.4 trillion ($1.27 billion).
Thien said this meant the
companies would need at least VND39.8 trillion ($1.91 billion) to pay the debts
in 2012 while their cash flow just reached only VND915 billion ($44 million).
“This is a worrisome statistics,”
he noted, adding that in reality, there were many more property companies
facing the same trouble.
According to figures released by
Dragon Capital, an integrated investment group centred around the emerging
financial markets of Vietnam, some VND70 trillion ($3.37 billion) are needed to
buy up the 70,000 apartments on sale in Hanoi and Ho Chi Minh, supposing the
average price is VND1 billion ($48,000) per unit.
Indeed, apartments in the two
cities are normally sold at much higher prices. Ho Chi Minh City Property
Association reported that 90 per cent of the city-based property firms had
suffered from losses since last year.
Thien said property businesses’
huge debts and unsold apartments would continue to pose a big risk on the
banking system and likely force the companies to bankrupt. And these indicators
are typically showing the bad heath of the business community and the economy
as well.
“If there is no solution to
stimulate house buying demand, it will take at least seven years for the
companies to sell off these apartments,” Thien said.
Massive debts and inventories
Huge debts are also reported in
several sectors. According to Vietnam Institute of Economics’ data, 15 major
cement companies were bearing an aggregate debt of VND25.5 trillion ($1.22
billion). Vietnam Customs in early September announced that nine wholesale
petrol traders owed more than VND192 trillion ($9.23 billion) in taxes, with
the majority being overdue. Petrolimex was the biggest debtor, followed by
Military Petroleum Corporation, Vinapco Company and PetroVietnam Oil
Corporation.
The General Statistics Office
(GSO) reported in late September that the inventory index in the processing and
manufacturing sector mounted by 20.4 per cent on-year by early last month.
Notably, in the corresponding period last year, the index decreased by 5.5 per
cent.
Vietnam Construction Porcelain
and Ceramic Association chairman Dinh Quang Huy said the total value of the
local porcelain and ceramic companies’ inventory reached VND3.5 trillion
($168.27 million) in September.
Narrowing production and increasing closures
The GSO also reported the Index
for Industrial Production (IIP) in this year’s first nine months grew just 4.8
per cent on-year, compared to the 7.8 per cent rise reported in last year’s
corresponding period.
HSBC last month also released its
Purchasing Managers Index 2012, conducted over 400 manufacturing companies in
Vietnam last August. All the indexes about output, new orders, inventory and
employment remained below 50 points, meaning the manufacturing economy is
generally declining.
Thien estimated operating
enterprises already had to cut down 30 per cent of their production capacity.
According to the Ministry of
Planning and Investment (MPI), in 2011 and this year’s first eight months, more
than 88,500 enterprises declared bankruptcy and stopped operation, accounting
for over 40 per cent of the total number of businesses closed since 1986..
“But these figures have not fully
reflected all difficulties facing enterprises now. We have failed to take into
account operational enterprises’ narrowed production and employment,” Thien
said.
He pointed out that with 470,000
enterprises still maintaining operation, a 30 per cent cut to their production
capacity would equal to the closure of a further 140,000, and supposing each
company employed five to 10 workers, more than one million workers had been
made redundant.
“Unemployment will result in
reductions of incomes and a rise in social disorder and in a macro-view, the
economy’s total demand will also remarkably decrease and Vietnam’s economic
growth is badly affected,” said Vo Tri Thanh, vice director of the Central
Institute for Economic Management.
Thanh said with local businesses
were facing serious problems, Vietnam’s gross domestic product (GDP) could only
grow 5.1-5.2 per cent this year.
HSBC in early September also
forecast the GDP would slow to 5.1 per cent this year, against 5.89 per cent
last year, due to “business conditions in Vietnam remained challenging and
external demand continued to be weak, dragging down export orders, and local
low demand as well as many local enterprises trying to unload their debt.”
The ADB last week lowered
Vietnam’s growth forecast to 5.1 per cent for 2012 and 5.7 per cent for 2013.
The National Assembly early this
year posted an economic growth target of 6-6.5 per cent for 2012.
Recently, the MPI said it would
ask the government to reduce the target to 5.3-5.6 per cent for the year.
Thien said domestic production
would face another more challenging year in 2013. “Both consumers and
enterprises will take great caution in spending. Therefore it will be likely
that enterprises will not expand production in 2013. Thus the Vietnam Institute
of Economics forecast Vietnam’s GDP growth for 2013 would be 4-4.5 per cent.”
The government recently estimated
that GDP growth in 2013 would be about 6 per cent.
Thanh Thu | vir.com.vn
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