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How to rescue businesses?

One of the possibilities under consideration is either helping businesses iron out snags or letting weak enterprises dissolve themselves within the market rules.

Helping businesses or letting them fall apart

The Ministry of Planning and Investment reported that in the first quarter of this year, 2,400 businesses registered for dissolution but 11,600 others only wanted to suspend their operations or tax payments, showing an increase of 9 percent against the same period last year.

In the meantime, the National Assembly Economic Committee claimed that the number of dissolved enterprises rose 62.18 percent compared to last year’s figure.

According to the government report, the number of business start-ups decreased by six percent to17,800 with a total registered capital estimated at VND100.3 trillion, 10 percent less than in the same period last year.

Judging from such developments, Dr Cao Sy Kiem, President of the Vietnam Association of Small and Medium-sized Enterprises (VINASME), said as for those businesses going increasingly weak on account of subjective judgments and unable to operate any longer, they should be dissolved within the market rules. As for others running the risk of failing to develop because of objective factors, the State should help them through a difficult time.

He argued that if all businesses come into the equation, many will miss the chance to bounce back. So the State would rather introduce favourable policies for every business to overcome difficulties.

Dr Vo Tri Thanh, Deputy Director of the Central Institute of Economic Management, proposed delaying or reducing taxes, cutting interest rates and increasing the purchasing power in the domestic market.

Nguyen Dai Lai, a finance and banking expert said businesses with internal strength will be able to find a way out of the mess themselves.

To some extent, we are still managing the economy by command and commiseration, which is against the market rules, he said.

Former Minister of Planning and Investment Tran Xuan Gia suggested that businesses should be classified to see if they really lack capital before we decide to prime the pump.

Reasonable loan rates needed

Economist Bui Kien Thanh pointed out that most of enterprises’ capital comes from bank loans. He said although the ceiling deposit rate has been reduced twice since the beginning of this year, many businesses still find it difficult to access loans with high interest rates of 16-19 percent per year.

VINASME President Cao Sy Kiem proposed cutting interest rate to help businesses access more bank loans. But what we need to do is to reduce loan rates, not deposit rates, which bring in good profits for banks but cause losses to businesses.

With the rate of inflation expected to remain at a single-digit figure in 2012, it is possible for businesses to develop their production if interest rates are maintained at 14-15 percent per year.

The declining purchasing power is another negative factor to consider. So the government should put effective measures in place to stimulate the national economic growth.

VOV