Interest rates, power cuts top enterprise concerns

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High credit costs and power cuts are factors that most worry enterprises in the country, according to survey results released last week by the Vietnam Chamber of Commerce and Industry (VCCI).

The high interest rate on loans as well as power cuts in the second quarter had pushed up production costs, respondents said in the Vietnam Business Insight Survey that was supported by the Lee Kuan Yew School of Public Policy's Asian Competitiveness Institute and the Asia Foundation, as well as the General Statistics Office.

The survey, which covered 380 firms across the nation, found 64 percent of the respondents paying interest rates of between 12 and 16 percent on short-term loans. They said the rate was high and unreasonable at a time when global economic crisis-related difficulties still remained.

Head of the VCCI's Business Development Institute, Phan Thi Thu Hang, said the rates were at the peak of what firms could suffer at 16 percent.

About 94 percent of the respondents wanted reasonable rates of less than 12 percent, the quarterly survey found.

Prime Minister Nguyen Tan Dung in May told the State Bank of Vietnam to order lenders to bring down borrowing costs to 12 percent and cut the deposit rate to 10 percent.

Hang said local firms were optimistic that recent efforts by the government in reducing interest rates would succeed, but they also felt more efforts were needed.

Power supply

More than half the survey respondents said regular power cuts in the second quarter two to three times a week in some areas significantly impacted production.

The survey did not report any loss suffered by local firms from the power cuts, but said 40 percent said the impacts were "serious" and 16 percent said they were "very serious."

Hang said the power cuts had raised awareness among the firms of the importance of power-saving measures.

The survey showed 60 percent of the respondents setting the goal of effecting 10-20 percent power savings over the next three years.

Another institute official who did not want to be named said local firms in the Mekong Delta were facing the challenge of finding skilled workers as they expected increases in production and sales in coming quarters.

The survey showed that a shortage of skilled workers was a big concern for the firms in the delta, a region that lacks professional training centers, he said.

Sales and inventory

A report issued last week by the General Statistics Office said production and sales posted growth rates of 13.7 and 12 percent respectively in the first seven months while inventory climbed 37.5 percent.

Vu Van De, head of the office's Industry Statistics Department in HCMC, said the crisis has passed and local firms had reported recovery that was reflected in production and sales growth, but cautioned inventory had also increased at the same time.

"There is an unbalance in production and sales," said De, suggesting that firms need to take steps to address this.

He said the biggest growth rates of over 20 percent in sales were achieved by ceramics, alcohol beverages and dairy products in the first seven months of the year.

However, non-alcohol beverages had the highest inventory that was up six times over the same period last year, De said, adding this industry was followed by cement, with more than two times higher than last year's January-July inventory.

The tobacco industry had the lowest inventory, dropping 39.2 percent year-on-year, while seafood, foodstuff, and vegetables posted similar inventories to last year, De said.

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