Businesses struggling amidst post-pandemic recovery

By Hoai Thu   October 27, 2022 | 06:20 am PT
Businesses struggling amidst post-pandemic recovery
Lawmaker To Ai Vang speaks at a National Assembly session on October 27, 2022. Photo by Pham Thang
Although economic figures indicate a healthy post-pandemic recovery, large numbers of businesses are still being dissolved, indicating the need for more government support, concerned lawmakers say.

Vietnam’s GDP expanded by 8.8% in the first nine months and is set to grow at 8% for the whole year, but the period saw 13,820 businesses leave the market.

"Why are businesses facing many challenges when the economy is recovering?" lawmaker To Ai Vang, deputy from the southern province of Soc Trang, asked at the ongoing National Assembly meeting Thursday.

Loans account for around 70-80% of businesses’ capital, but they are struggling to borrow much needed funds as banks’ credit quotas are full, she said, adding that many lenders were mobilizing short term deposits for mid- and long term loans.

This poses risks for banks, businesses and the economy, Vang said. "Businesses are borrowing at high interest rates, which cuts their profit margin."

NA deputy Hoang Van Cuong, vice principal of the National Economics University in Hanoi, said that businesses were facing big challenges in repaying their debts.

As 2023 approaches, support policies for post-pandemic recovery will end. Many businesses will face the burden of repaying debts to banks after enjoying a two-year payment delay due to Covid-19, he said.

"The government needs to map out plans to support businesses in dealing with the worst case scenario: an economic recession," he added.

Minister of Planning and Investment Nguyen Chi Dung had reported to the National Assembly last week that businesses were facing large pressures in rising manufacturing costs.

Input prices for the manufacturing sector rose 6% year-on-year in the first nine months, the highest increase in the last 10 years. This, in turn, pushes up consumer goods’ prices, he said.

Vang proposed that the government reviews its policies to provide more support to small and medium businesses. It should extend tax breaks and fee waivers and help businesses restructure their debts, he said.

"Commercial banks should reduce their expenses to have more room for lowering loan interest, especially in the agriculture, forestry and fisheries processing sectors," she said.

Cuong proposed he government accepts an increase in overspending to have more resources to support businesses.

He said the government should focus its public spending on ongoing projects instead of starting new ones.

It should also use public funding on projects in the railway, sea logistics and information technology sectors, he said.

Vietnam cannot keep borrowing from foreign investors to develop its metro projects, as this keeps it dependent on them and will bring about a lack of synchronization and connection, Cuong said.

Domestic companies should be given the chance to build such projects, he said, adding that difficult times could give rise to strong businesses if the government can take advantage of the opportunity.

The parliament will conclude its discussions Friday on economics and budget related topics.

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