A woman carries bricks for burning at a private factory outside Hanoi. Photo: Reuters
As the economy struggles to regain its momentum, much hope has been laid on a plan to rescue local businesses being drafted by the Ministry of Industry and Trade.
But experts say that from what they have seen so far, the proposed measures fall short of expectations due to a lack of details and really strong actions needed to pull the economy out of the ongoing downturn.
The plan aims to focus on helping companies reduce their inventory, access bank loans and prepare for production expansion next year. The ministry said it will also facilitate exports and restrict imports of consumer goods to support local producers.
These goals are too generic and do not offer any breakthrough measure, the experts say.
Nguyen Mai, chairman of the Vietnam's Association of Foreign Invested Enterprises, said the plan fails to reflect how serious the situation already is.
Difficulties in doing business, which came as results of an economic slump that began in 2008, are not limited to any sectors or companies. However, the Ministry of Industry and Trade did not undertake a thorough examination, simply saying that more than 100,000 companies are struggling and that the industrial production index has fallen, Mai said.
Only a complete understanding of the current situation can allow the ministry to come up with effective measures for its plan, he said.
"This has to be a real rescue plan, not just efforts to ease some difficulties for businesses; otherwise the economy won't see a recovery next year."
Pham Thu Hang, general secretary of the Vietnam Chamber of Commerce and Industry, said the new rescue plan does not pay due attention to small and medium companies, which need government support the most. Instead it continues to promise more favorable policies for state-owned mining and electricity companies.
Hang suggested the ministry considers more specific measures for small companies, including easing credit access, improving distribution systems for local products and removing restrictions on promotional and advertising expenditures.
Industry and Trade Minister Vu Huy Hoang admitted that the draft plan announced last week did not have a very careful analysis and assessment of problems that local companies are facing. He said his ministry welcomes all suggestions to revise the plan that will be submitted to the government soon.
Many firms have cut back or stopped production amid a slowing economy, which expanded 4.38 percent in the first half of 2012.
According to the government, 30,300 companies shut down completely or suspended operations in the first seven months, up 6.4 percent from the same period last year.
Inventories of the manufacturing sector as of July 1 jumped 21 percent from a year earlier, the General Statistics Office said in a report Monday. Stockpiles rose the most in fertilizers, plastic products and telecom equipment production.
State Bank of Vietnam Governor Nguyen Van Binh said last week that the central bank cannot pump money into the market to rescue struggling businesses. Rescuing all companies, even weak ones, is not good for the economy in the long run, he said.
Nguyen Viet Manh, director of the central bank's credit department, said the banking sector has made sacrifices by extending payment deadlines and refraining from downgrading late payers.
However, many companies are too weak and poorly managed and these should not be rescued, he said.