Businesses at breaking point amid economic challenges

By Phuong Anh, Thi Ha, Minh Son   May 18, 2023 | 06:45 pm PT
More than 77,000 businesses have suspended operations in the last four months and many more sold assets to remain afloat as major challenges plagued the economy.

"It has never been this difficult," a representative of a manufacturing business association in Ho Chi Minh City said recently, referring to the large number of business owners selling houses and other personal assets to pay off debts.

Some are even considering selling out their businesses to ward off bankruptcy, he added.

Ly Kim Chi, chairwoman of the Food and Foodstuff Association of HCMC, said companies that have been in business for dozens of years are now considering selling out due to a resource crunch.

A recent survey by VnExpress and the Private Sector Development Committee found that 22% of businesses saw revenues plunge by more than half in the first quarter.

Nearly 49% of them had a "negative" outlook for this year compared to last year, and only 2% were "positive."

Dau Anh Tuan, deputy general secretary of the Vietnam Federation of Commerce and Industry, said the disappearance of well-known, long established companies would be a "bitter" blow.

More mergers and acquisitions are expected to occur in the next two years, industry insiders said.

Neil MacGregor, managing director of Savills Vietnam, said many property developers have approached his company to do valuation with an eye on selling stakes.

Other companies are trying to scale down operations and laying off workers to survive.

Construction materials producer Secoin has seen exports drop by 70% and all its factories are running at below capacity, its chairman, Dinh Hong Ky, said.

Ky has leased unused capacity to other companies to earn some revenues.

Napoli Coffee has seen a slump in orders in the last four months.

"There were months when we had no export orders," founder Nguyen Duc Hung said, adding that the company has laid off many employees, mostly in sales.

Government data shows that 77,000 companies suspended operations in the first four months, 25% more than in the same period last year.

The number of real estate companies suspending operations rose by 61%, and 50% of property trading platforms have shut down.

Lack of access to credit is one of the main problems businesses face.

Loan interest rates of 12-14% a year have become a burden for many companies, and so credit growth in the first four months was only 2.7%, down by two-thirds from the same period last year.

But even companies willing to pay the high rates have trouble getting credit.

A spokesperson for a large property developer said banks have been refusing to lend money fearing the high risks posed by the delays in giving permits.

A government support package with a 2% loan interest rebate has been tardy with only 0.8% of the proposed VND40 trillion disbursed in the first quarter.

Nguyen Minh Thao of the Central Institute for Economic Management said the business environment has not changed much in the last three years.

Tuan of the Vietnam Federation of Commerce and Industry called for making tax waivers easily accessible and simplifying administrative procedures to revive businesses.

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