Enterprises operate moderately and investment is limited due to difficulties in capital

VCN - A survey conducted by the HCM City Business Association in February 2023 of more than 100 businesses showed that up to 83% of businesses were facing difficulties.
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Orders dropped sharply, wood exporters desperately need low-interest capital to retain customers and keep their markets.
Orders dropped sharply, wood exporters desperately need low-interest capital to retain customers and keep their markets.

Capital and interest rates continued to be big problems causing difficulties for businesses, with 40% of enterprises complaining of difficulty in accessing capital; 43% said the loan interest rate was high; and 38.2% of enterprises said the loan procedure was complicated and time-consuming. Additionally, there were difficulties in shrinking markets, high inventories, and rising input material prices.

All industries are in trouble

Nguyen Phuoc Hung, Standing Vice Chairman of HCM City Business Association, said that the production and business activities of textile and garment enterprises faced difficulties due to the impact of high interest rates and fluctuating USD exchange rates, which directly affected the import of raw materials for export processing, leading to pressure to reduce profits in 2023.

Moreover, due to high bank interest rates, businesses have operated in moderation, tried to overcome this period and limited investment this year.

For the handicraft and wood processing industry, orders continued to decline sharply, expected to decrease until the end of the second quarter of 2023 with a decrease of about 50-60%. The reason is that the consumption of the European and American markets has decreased, and domestic people and businesses have limited procurement, construction, or repair activities. Meanwhile, businesses in the food industry need to advance the cost of prepaying crops and reserve supplies while the input pressure is high. Enterprises need to borrow capital at an appropriate interest rate to support businesses to retain customers, keep their market, and contribute to economic recovery.

Regarding real estate, according to Hung, the market is shrinking in business scale, stopping investment and construction of new projects, the market is almost frozen; a number of bonds issued by real estate companies are maturing, putting pressure on the real estate market. The export turnover of the building materials industry declined seriously, especially in key markets including the US, Japan, and the EU. Steel price decreased by 60% due to large supply while demand decreased, steel export output decreased by 69.3%; cement factories were sluggish, with exports down 55%, the domestic market also declined due to the freezing of public investment and real estate projects, and enterprises owed each other.

Recommend controlling the ceiling of interest rates at 8-8.5%

To help businesses overcome difficulties, the HCM City Business Association has reported in writing to the People's Committee of HCM City, which raised many recommendations.

Specifically, the banking system tightens lending conditions with a high level of safety for banks such as low collateral valuation, low loan-to-collateral ratio, and requiring additional collateral for loan contracts. Besides, high loan interest rate is a big obstacle affecting the business results of enterprises. Currently, most loan interest rates are above 10%/year, which will be difficult for businesses to use leverage.

According to the HCM City Business Association, the fact that the State Bank (SBV) has lowered the capital mobilization interest rate of commercial banks and controlled the net interest margin (NIM) at 3% was also a necessary solution for commercial banks to share difficulties with the economy in order to lower lending interest rates. The HCM City Business Association suggested that the SBV should control the interest rate ceiling, keeping the lending interest rate around 8-8.5%.

The HCM City Business Association also recommended that it is necessary to continue implementing the policy of extending loans for one year instead of compounding and paying debts in the next year like the 2021 support period. Accordingly, the duration of the loan contract is extended in proportion to the grace period without changing the amount to be paid each period according to the previous repayment schedule. This will reduce debt repayment pressure compared to the requirement to equally divide liabilities according to Circular 01/2022/NHNN-TT of the SBV.

Additionally, the HCM City Business Association recommended commercial banks step up the implementation of the 2% interest rate support package for businesses, pay attention to debt structure, and keep debt groups to help businesses overcome difficult times. On the side of the SBV, it is necessary to soon guide social housing businesses to apply for loans from the support package of VND120,000 billion.

By Nguyen Hien/ Ha Thanh

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