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

VCN - A recent survey conducted by the Ho Chi Minh City Business Association in February 2023 with more than 100 businesses showed that up to 83% of businesses are facing difficulties.
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Orders dropped sharply, wood export businesses desperately need low-interest capital to retain customers and keep the market
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Capital and interest rates continue 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.

In addition, there are difficulties in the shrinking market, high inventories, rising input material prices, etc.

All industries face difficulties

Mr. Nguyen Phuoc Hung, Standing Vice Chairman of Ho Chi Minh 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, directly affecting the import of raw materials for export processing, leading to pressure to reduce profits in 2023.

On the other hand, due to too high bank interest rates, enterprises operate in moderation, trying to overcome this period and investment restrictions this year.

For the handicraft and wood processing industry, orders continue to decline sharply, it is 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 and 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 the market and contribute to a better economic recovery.

In the field of real estate, according to Mr. Hung, the market is shrinking business scale, stopping investment and construction of new projects, and 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 the key markets of the US, Japan and Europe. Steel prices decreased by 60% due to the large supply in the demand zone, the steel export output decreased by 69.3%; Cement factories faltered, and exports fell by 55%, the domestic market also declined due to the freezing of public investment and real estate projects, businesses owed each other.

It is recommended to control the ceiling of interest rates at 8-8.5%

To support businesses to overcome difficulties, the Ho Chi Minh City Business Association has reported in writing to the People's Committee of Ho Chi Minh City, which raised many recommendations. Specifically, currently, the banking system tightens lending conditions with a high level of safety for banks such as: low collateral valuation, loan-to-collateralized ratio being pulled to a low level, require additional collateral for loan contracts. Besides, high loan interest rate is also a big obstacle affecting the business results of enterprises. Currently, lending interest rates are almost always above 10% per year, which will be difficult for businesses to use leverage.

According to the Ho Chi Minh City Business Association, the State Bank (SBV) has measures to lower the capital mobilization interest rate of commercial banks, controlling the net profit margin (NIM) at 3% is also a necessary solution for commercial banks to share difficulties with the current economy in order to lower lending interest rates.

The Ho Chi Minh City Business Association suggested that the State Bank should control the interest rate ceiling, keeping the lending interest rate around 8-8.5%.

The Ho Chi Minh City Business Association also recommends continuing to implement the policy of extending the loan for one year instead of compounding and repaying the debt in the next year like the 2021 support period. Accordingly, the loan contract's duration is also extended, corresponding 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 State Bank.

Foreign capital poured into many Southeast provinces at the beginning of the year Foreign capital poured into many Southeast provinces at the beginning of the year

In addition, the Ho Chi Minh City Business Association recommended commercial banks step up the implementation of a 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 State Bank, it is necessary to soon guide social housing businesses to apply for loans from the support package of VND 120,000 billion.

By Nguyen Hien/Bui Diep

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