Market observers and industry insiders say that the normal ramping up of production for the holiday season is unlikely to happen this year.
Cao Tien Vi, chairman of Saigon Paper Corp., Vietnam's largest private paper producer, said many companies have no choice but to take things slow this year even though they should have increased production already.
High interest rates and input costs have made them more cautious, especially after nearly a year of production cutbacks and delayed business plans, Vi told Thanh Nien.
Other producers said they still look forward to the upcoming shopping season around New Year holidays and the following traditional Tet festival. However, they said they also think it's better to keep their expectations low this year.
Phan Van Thien, deputy general director of confectionery maker Bibica, said retail prices of Bibica products during the Tet holidays could rise 10-15 percent from a year earlier, so sales are not expected to increase by more than 15 percent, much lower than the usual growth rates of 25-30 percent.
If interest rates can be lowered, prices will fall and sales will surge, Thien said.
Interest rates affects many companies in the production chain, so if they can be cut to 17-19 percent, consumer prices will decrease, he said.
Many lenders have pledged to cut rates to as low as 16 percent, but a survey by Thanh Nien found that most corporate clients still have to borrow at 21-21.5 percent a year.
A credit manager at a bank said the funds set aside for cheap loans are limited, accounting for only 4 to 5 percent of total loans. It means each branch of his bank can only offer loans at 17-19 percent to two or three companies, while the rest have to accept higher rates.
Ngo Ngoc Hoa, director of undergarment producer Anh Khoa, said high borrowing costs and slow sales are hurting businesses. A nationwide salary increase in October will put even more pressures on them.
"Only when interest rates really fall can we take out loans to boost production for Tet. Otherwise, interest payment would be just too much to bear," she said.