New price hikes could cancel recent gains for the thousands of businesses that have reopened this year after shutting down in the dismal economy of the last several years.
Business representatives said they had been “gritting our teeth” to put up with three gasoline price increases the past two months. They say a new power price effective August 1 is another strike against not just the returnees, but the entire economy.
Average power prices were raised 5 percent to VND1,508.85 (7.1 US cents) per kilowatt hour, with state-owned utility Electricity of Vietnam blaming higher input costs. It had also raised prices by 5 percent in December.
The Finance Ministry had previously pointed to an upward trend on international markets and allowed gasoline prices to rise 3.3 percent in June and then a further 1.9 percent to its all-time high on July 17.
Tran Ba Dung, deputy director of Ho Chi Minh City-based bag production company Huong Mi, told Thoi Bao Kinh Te Saigon that his company was recently selected to receive financial support for a price stabilization program.
But the good news was short-lived and the new power price came as a shock.
Dung said several days after the more expensive power went into effect, his material suppliers announced a 10 percent price increase.
“We meanwhile cannot raise our price as purchasing is still low,” he said.
As part of the price stabilization program, the company is required to cut prices by 10 percent.
Some business owners are panicking, as they cannot keep up with changes in macroeconomic policies.
The Grant Thornton International Business Report 2013 showed that Vietnam’s business optimism has dropped lower than its low levels at the end of 2012.
It said the balance percentage of optimism/pessimism fell from 22 in the first quarter to minus 14 in the second, one of the lowest among Southeast Asian countries. That is compared to minus 10 at the end of last year.
An unidentified director of a home furniture company said confidence is the core matter in doing business.
“But the irony is when you put your confidence [in the government], you’ve got the risks of losing confidence from long-established partners.”
He recently had to beg customers for a delivery delay, offering to return their deposits plus paying compensation, as they signed contracts in March for distribution in September.
“We have not been able to refresh production as expected.”
He said that at the beginning of the year, he was positive about the business outcome and was making a plan to invest in an assembly line producing plaster ceilings for expansion.
But that plan was shattered for different reasons, “unstable policies the biggest one,” he said, cited by Thoi Bao Kinh Te Saigon.
The director said he did not expect loan interest to remain so high despite various financial support announcements from the central bank, and then increases in fuel and power prices.
He said he would now focus on clearing inventories as much as possible and is determined not to plan any new investment at least until the year’s end.
The Ministry of Finance report said more than 40,500 new businesses were established during the first half of 2013.
Figures from Ho Chi Minh City Statistics Office showed that the number of new businesses in the area was 3.1 percent up from last year’s first half, but their registered capital down 25.5 percent.
Pham Ngoc Hung, vice chairman of Ho Chi Minh City Union of Business Associations, said the recent power and price hikes “have robbed the economy off its chance at revival by being a big obstacle to businesses that have just joined the economy and those just recovering to come back.”
Hung said in the newspaper report several union members have announced halts to new investment this year.
He said the new prices do not only affect businesses directly, but will cause consumers to tighten their belts more and thus drag consumption even lower.
The city’s business representative said the government should do businesses a favor by adopting transparent and specific economic management policies that stay stable for at least three to five years.
He said no businesses can have the nerve or capability to make long-term operation plans in a blizzard of price increases.
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Thanh Nien News (The story can be found in the August 16 issue of our print edition, Vietweek)