Difficulties Surround Businesses
Business owners can’t remember last quarter when they had a bright economic outlook because they were beset by rising prices, running out of capital and falling orders.
Mr. Truong Chi Thien, General Director of Vinh Thanh Dat Food Company, shared that in the last 5 months, the business situation has always been hindered because the market has many disadvantages.
As a manufacturing enterprise, the first major difficulty he mentioned was the increasing cost of raw materials and labor. Like eggs, the price is now up 20% y/y because of the high increase in raw materials.
“Gasoline prices have recently decreased more than before, but the impact of the exchange rate makes the price of animal feed unable to cool down. Meanwhile, employees’ salaries still have to increase because all their living expenses have increased,” said Mr. Thien. tell.
Vinh Thanh Dat has about 300 employees and these people received a 10% increase in salary in August. However, given the current difficult situation, Mr. Thien said, adjustments may be required.
A joint survey of business associations, the Research and Development Department of the Private Economy, under the Prime Minister’s Advisory Council for Administrative Procedure Reform (Board IV) said that input costs are putting pressure on business activities. production motion. The cause of this problem comes from external factors such as rising world fuel prices, a strong dollar, and the risk of disruption to input supply chains due to China’s zero-Covid policy. . Domestically, the shortage of gasoline in economic centers such as Ho Chi Minh City and Hanoi has not been resolved, causing transportation costs to increase sharply, and high interest rates to push up production costs.
Gasoline is sold by can on Hanoi Highway, Thu Duc City, Ho Chi Minh City in the context of many gas stations running out of stock, selling in a trickle. Photo: Thanh Tung
The next problem that businesses have to face is the pressure of reduced orders. “From September to now, the number of orders has dropped sharply,” said Pham Xuan Hong, chairman of the Ho Chi Minh City Textile, Embroidery and Knitting Association. The operating picture of enterprises in the industry is in contrast to the first months of the year. As a result, the number of businesses cutting workers is increasing day by day.
Similarly, Mr. Le Xuan Tan, a member of the board of directors of Hanh Phuc Wood Company Limited (Dong Nai), shared that businesses in the industry often lose 30-40% of orders.
“There are businesses that lose more or stop orders altogether. Who can keep orders now is very rare,” he said, adding that since the blockade caused by Covid-19 last year, the number of orders has become uncertain.
October’s Vietnam Manufacturing Purchasing Managers’ Index (PMI) report shows signs of a global economic slowdown affecting Vietnamese manufacturers as both new orders and exports worst in 13 months.
Mr. Hong assessed: “It is very difficult to find a practical solution at this time when the impact of the Russia-Ukraine conflict has not ended. The shopping trend of consumers around the world has dropped sharply.” According to him, businesses have tried to diversify and expand export markets, but in general, it is still difficult when the world economy declines.
Workers of Tashuan Company (Tan Tao Industrial Park, Binh Tan District) gathered at the factory when the board of directors announced the closure. Photo: Mai Chi
Besides the specter of recession, protectionist policies of other countries also make it difficult for businesses to export.
A leader of a food production business said that instant food items, including noodles and pho, were “clogged” in many markets, causing the total amount of goods exported to other countries to decrease by 30-40%.
“Europe has recently tightened regulations not to circulate products containing ethylene oxide, so each container and each export item must have a certificate,” he said. This has caused businesses to incur testing costs.
This pressure weighed on businesses, causing many export orders to Europe to drop to a record. In particular, according to this businessman, there are orders for export to some countries down 70-90%.
The wood industry association also shared that the trade defense lawsuits that occur in a row also cost businesses a lot of time and effort to resolve as well as disadvantage in market access.
The story of labor at this time also puts businesses in a difficult position. On the one hand, many businesses do not have new orders, high production costs have to face the calculation of downsizing and mass reduction of employees. On the other hand, some expressed difficulty in finding suitable and skilled workers
The leader of this business said that after the epidemic, workers returned to Ho Chi Minh City massively, but the quality was not high and unstable. The company has made up for the shortfall through recruitment from labor services, but the quality is still not commensurate with the demand.
In the context of difficulties surrounded by many sides, businesses need money to maintain and support, but capital flows are running out.
Mr. Truong Chi Thien said that the sharp increase in interest rates by banks caused Vinh Thanh Dat’s debt to increase by 30% compared to previous months. Debt collection is also more difficult.
“Customers who imported goods all announced that they would like to extend their debt because the bank ran out of room to lend. There were many other units that provided loans with very high interest rates, so they could not manage,” he said. As the unit in the middle, he said the business is very tired but only has to “try to share with each other during difficult times”.
Mr. Le Xuan Tan again expressed concern when it was only a little while until the end of the year – the time when businesses have to fulfill their tax obligations, fees with the state, debts, and pay salaries and bonuses to employees motion.
“If the resources cannot be properly prepared, businesses will easily fall into a crisis,” he said.
For real estate businesses, this problem is even more serious when Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association said, because of the deep decline, even loss of liquidity, some businesses had to borrow money. or sell off assets, projects, or products with deep discounts of up to 40-50% of the contract price.
Board IV assessed that the effect of decreasing confidence from the market, especially for real estate businesses, has spread to all other businesses, making the bond mobilization channel unable to help businesses attract investors. short-term investment to solve urgent problems. The stock market was also strongly affected, making capital difficulties worse. Many large enterprises have to arrange money to buy back bonds before maturity.