The Vietnam Chamber of Commerce and Industry (VCCI) said that the Government should introduce strong measures to lower business expenses in light of falling demand.
Government urged to take steps to help out the business community
The report, recently submitted to the Government by VCCI at meeting for April, pointed out a number of pitfalls in the economy, but also suggested some solutions.
Vu Tien Loc, Chairman of VCCI, said that there were a number of bad signs in the nation's economic indicators, such as declining profits and revenues, mounting inventories, along with decreased productivity. The labour market also cooled off, he said.
Many businesses in trouble
He added that, during 2011 and the first fiscal quarter of this year, 8.4% of businesses have either declared bankruptcy or ceased operations.
He did point out that the failure of businesses, although unfortunate, is inevitable and natural in a market economy. "In developed countries around 25% to 30% of businesses fail within the first three years. This number might be higher in Vietnam because of global financial difficulties and difficulties in competing on the international level," he said.
The report indicated that, while many of the business failures were due to losses, others could be attributed to restructuring.
Of the businesses that were forced to close their doors, 9.2% were domestically run, while just under 2.6% were foreign-invested.
The VCCI explained that FDI firms have certain advantages, such as more stable export markets, better access to capital and a skilled workforce.
Still, during the first quarter of this year, over 18,700 new enterprises were set up, indicating that, despite economic difficulties, many businesses are able to continue and even expand.
Government's role
Many of the difficulties faced by businesses, according to the report, come from rising costs and inventories, with decreased access to capital. Some of the industries hardest hit have been real estate, construction, processing, manufacturing, trade, and transportation and logistics.
Possible solutions from the VCCI report include the Government creating policies that would aid the production sector and help Vietnamese businesses find outlets for their products, especially export markets.
The VCCI report also underscored the need for The Government to hasten its roadmap to lower corporate income tax rates to 20%, from current 25%.
New fees, including congestion charges should not be applied for presence, and a lowering of trade union fees were also on the list of policy improvements.
Although the VCCI report acknowledged that the issuance of Government bonds and treasury bills could be effective tools in increasing the liquidity of banks, it could also lead to capital shortfalls for enterprises and may not help bring down interest rates concurrently with the inflation rate.
The agency proposed that Government set up a fund for small and medium-sized enterprises to improve their access to credit.
