Companies should actively enhance management capacity and restructure drastically now at a time they were seeing high risks of losses, debts and bankruptcy, economist Bui Kien Thanh said at a conference in Ha Noi late last week.
HA NOI —
Propping up enterprises had become an urgent issue in the face of stagnant production, increasing inventory and falling profits, he said, noting that 79,000 companies went bankrupt last year.
Unsold inventories and overdue debts remained a major problem for firms in tough business conditions, as turnovers have declined and slimmer profits have been inadequate to cover the high costs of financing.
Many companies have also used capital unreasonably, with many firms using short-term capital for long-term investments, he said, citing a seafood firm that failed to pay its debts after taking out a short-term loan of VND1.2 trillion (US$57.7 million) to invest in a beverage plant.
"In doing business, the most important thing is to manage risks and assure security," Thanh said. "Enterprises can hope for development only if they can maintain stability and survive crises. It's a pity that this seems not to be truly appreciated."
Economist Nguyen Tat Thinh said on the Government website chinhphu.vn that it was about time companies made more solid investments and focused more on domestic markets. He suggested they invest in infrastructure in small urban areas, processing industries, agriculture and rural areas, healthcare, and projects for which they could approach international capital sources. He also urged firms to publish financial reports to prove themselves more reliable to capital suppliers.
It was also important to hasten equitisation of State-owned enterprises and put them into an equal competitive environment with other sectors, said Truong Dinh Tuyen, a member of the National Advisory Council for Financial and Monetary Policy. — VNS