Vietnam has weathered the global economic recession and is showing green shoots of recovery. However, there remain potential risks, and businesses are advised to draw up plans to cope with any fluctuations in the domestic economy.
Economic experts say there are a number of policy adjustments in 2010 that will affect business operations. Many provinces and cities will modify land prices to go up by 20-30 percent, causing corresponding increases in land, housing and office rents.
Government decisions to stop the 4-percent subsidy interest rate policy and increase the base interest rate will lead a rise in lending fees. Preferential policies for fees and VAT on many commodities, corporate income tax and personal income tax will no longer be applied in 2010, which will trigger a hike in material and labour costs.
A number of sectors such as electricity, coal, water and transport, are likely to increase their prices after being put on hold in 2009 to maintain macro-economic stability. The move will eventually cause a domino effect on the market, especially regarding input materials for production and daily living necessities.
In addition, the delayed effects of policies introduced in 2009, including disbursed loans, are expected to drive market prices and expenses up in 2010.
However, this year still presents many opportunities for businesses to make breakthroughs in development. Import-export taxes will be slashed, even to zero percent, as a result of WTO commitments and bilateral and regional free trade areas. The Government’s commitment to streamlining administrative procedures will help businesses reduce costs.
Dr Vu Viet Ngoan, deputy head of the National Assembly Economic Committee, says if the government can cut down 30 percent of its administrative procedures, total social investment capital will make up 40-41 percent of the GDP compared to 42.3 percent in 2009, while meeting the 6.5 percent economic growth target. This will help reduce investment from the State budget and mounting pressure on the macro balance, and also increase the quality of growth.
Dr Nguyen Van Thanh, a senior expert of the National Assembly, says businesses should seek to cut unnecessary costs, increase product quantities and restructure their products to minimise the impact of possible price hikes.
Dr Ngoan suggests that businesses shift to cash in on the domestic market, given the modest recovery of the global economy, the increasing trend of protectionism, and difficulties in export markets.
Nguyen Dinh Cung, an official from the Central Institute for Economic Management, explains that in the face of the global economic downturn, businesses introduced ‘impassive’ solutions, including cutting costs, the labour force, production, and working time. It’s now time for them to diversify and increase product quality, update production technology, improve management capacity, seek new markets, merge with other businesses and mobilise capital from different sources.
Hoang Minh Hao, an official from the Ministry of Labour, Invalids and Social Affairs, suggests that businesses develop healthy and harmonious relationships with employees to prevent disputes and strikes.
Dr Nguyen Thi Kim Thanh, Director of the Banking Development Strategy Institute points to the fact that policies are adjusted to keep up with market fluctuations and businesses should anticipate changes in policies to ensure their development strategies are on track.