Act before it’s too late

Newly registered businesses fell in terms of both numbers and capital, and the number of dissolved or suspended businesses, mostly SMEs, increased considerably.

Vu Quoc Tuan, former President of the Vietnam Craft Village Association, says a large proportion of 2012’s approximately 100,000 dissolved or suspended businesses were small and medium-sized. Production stagnation resulted in a low purchasing power, excess inventories, and oversupplies of money in banks.

Businesses need State assistance to escape the economic slowdown (Photo:vneconomy)

“SMEs are running short of capital for production, and the implementation of the credit guarantee fund is slow going,” says Tuan. “Tax-related issues are causing a headache for these businesses. Many wonder when they will enjoy corporate income tax cuts as they remain in a tight spot.”

Experts say Vietnam has yet to create an equitable business environment for all economic sectors, resulting in last year’s spate of business dissolutions or suspensions that was primarily borne by private SMEs.

Bui Quang Tuan, Deputy Director of the Vietnam Institute of Economics, points to the domestic business environment’s inadequate and unreasonable pressure on private businesses. He says many private businesses that normally operate efficiently declared bankruptcy while State-owned businesses stayed healthy.

“We are debating the Government’s VND30 trillion rescue package for the property market. But the real estate market only accounted for 0.1 percent of the country’s total GDP between 2008 and 2012. Several other economic sectors—such as production, manufacturing, and exports—that contributed significantly to last year’s growth did not receive any assistance,” he complains.

SMEs make up 95 percent of the total number of businesses, and they are expected to develop into the mainstay of the economy in the near future. They are currently forced to survive independently without State assistance.

SMEs have insufficient workshop space, pay high bank interest rates, and must deal with excess stock levels. Tuan thinks banks need to offer extremely low interest rates to these businesses lest they cease to exist.

According to him, SMEs cannot wait any longer for State assistance. Consequently, the Government cannot expect their considerable contributions to economic growth.

“We need to rescue the markets that directly contribute to economic growth,” says Tuan. “The property market’s results are expected to continue to underwhelm over the next three or four years, taking into account the huge amount of money needed for its rescue and a low demand for housing.”

He suggests that the government revise policies for SMEs, especially in settling administrative issues, and help craft associations expand their assistance for SMEs, including the Vietnam Chamber of Commerce and Industry (VCCI).

Tuan says craft associations need to examine the difficulties SMEs face and recommend solutions to the National Assembly and Government.

VCCI President Nguyen Tien Loc confirms SMEs form the backbone of the national economy and need legal and regulatory support for their operations. In addition, SMEs should receive preferential tax policies and specific support programmes to help improve their operational efficiency.

The Prime Minister recently signed a decision establishing an SME development fund that is designed to support businesses as they develop feasible projects and implementation plans, improve their competitive capacity, and generate jobs for local people.