According to a report from the Ministry of Planning and Investment (MoPI) released at the regular cabinet meeting for April, the number of businesses that dissolved or suspended operations in the past four months rose 9.5 percent over the same period last year, bringing the total to 30 percent since the start of business renewal. There are now 463,800 businesses operating in the country remaining in operation.
The MoPI notes with deep concern that the number of newly-established businesses is falling while that of businesses scaling down or stopping operations is rising.
Another report from the Vietnam Chamber of Commerce and Industry (VCCI) on the business situation says a gloomy forecast of businesses facing many difficulties means that more will withdraw from the market in the future.
Their biggest problems are high production costs and large unsold inventories in the wake of low consumer demand in some sectors, such as real estate, construction, processing, manufacturing, trade and transport.
The MoPI has attributed the poor capacity of domestic businesses to the slow recovery of the world economy, the on-going public debt crisis in Europe and steep price hikes in crude oil. In addition, high interest rates, a strong reduction in public investment, and the frozen property market, as well as poor management, obsolete technology and scattered investment have adversely affected production and businesses activities.
For the time being, bad debts make it impossible for a number of businesses to borrow capital from banks. More than 75.3 percent claim that this is one of the major obstacles to their operations.
The VCCI has asked the Government to support highly competitive businesses and effective project so that they can develop on the right track.
Reducing corporate income tax by 30-50 percent in 2012
The Government should speed up the implementation of public investment projects by ensuring a sufficient supply of capital for feasible ones, and helping businesses deal with issues related to job creation, input materials and unsold inventories.
The VCCI has proposed a tax break package that includes a 30-50 percent reduction of corporate income tax this year for small-and medium-sized enterprises (SoEs) and labour-intensive firms.
It has also suggested continuing the deferment of last year’s corporate income tax payments and reducing the corporate income tax rate to 20 percent.
It is imperative to encourage stimulating the capital market through investment funds and issuing bonds and shares in order to meet the demands of non-State sectors and avoid too much dependence on bank loans, which currently amounts to 80 percent of operational capital.
High interest rate of 18 percent still imposed
According to a recent VCCI survey of businesses, around 50 percent are suffering from a lending interest rate of more than 18 percent while 75 percent can only afford interest rates of 15 percent since 13-15 percent is more reasonable. Therefore, it is essential to help SoEs access bank loans at reasonable interest rates to reduce their business production costs.
Project to restructure national economy needed
The VCCI has asked the Government to implement the project to restructure the national economy as soon as possible and adopt a national industrial policy to set orientations for businesses and accelerate the restructuring of State-owned enterprises and commercial banks.
In addition to supporting SoEs, there should also be programmes to support major businesses in improving their financial management capacity, developing modern management standards and taking effective measures to reduce costs and prices, as well as control risks.
The VCCI has asked requested the Government to help businesses fully exploit the domestic market by bringing Vietnamese goods to rural areas and speed up negotiations for bilateral and multilateral agreements with regional countries to expand overseas markets.
Regarding administrative reform, the VCCI has emphasized the importance of cooperation between local agencies and businesses to deal with administrative formalities and enhance the implementation of potential socio-economic development projects.
The Government should promote information exchanges and dialogues between its agencies and businesses to reflect the current practicalities and proposals from the business community as well as Government policies for businesses.
For its part, the VCCI aims to conduct regular surveys into businesses and their proposals, and report the findings to the Government and the Prime Minister.