Government seeks to resolve businesses’ capital shortage

Saturday, Jun 25, 2022 08:59

Businesses are in dire need of funds post-pandemic to buy raw materials. — Photo nld.com.vn

A HCM City programme to link banks and businesses has seen around VND93 trillion (US$3.97 billion) disbursed so far this year to help revive the economy which was battered for two years by the COVID-19 pandemic.

Tran Du Lich, a member of the prime minister's economic advisory group, said the programme was one of the best ways to help businesses access resources to fund their recovery.

Analysts say credit growth has risen sharply, indicating the efforts made by credit institutions to supply the economy with capital, and some banks have reported using up their full-year quota in just four to five months.

Amid the rapid economic recovery, many businesses say they need more funds to supplement their working capital and expand. For small and medium-sized enterprises, banks remain the main source of capital, and it does not help their cause when lenders run out of credit room.

With more than 95 per cent of the country’s enterprises being small or medium sized, this is a widespread difficulty.

Chu Tien Dung, chairman of the HCM City Business Association, said local businesses made great efforts to sustain production during COVID-19.

But now, needing to rapidly restore production, they were facing a number of challenges ranging from a shortage of workers, supply chain disruptions, increases in input costs, and, especially, shrinking cash flows.

Viet Nam Mineral Powder JSC, which exports to India, Bangladesh and Sri Lanka, saw rapid growth in the last decade until the pandemic drove down its exports by 60-70 per cent.

Soaring input and logistics costs and cancelled orders meant its profits were down by nearly VND60 billion (US$2.6 million) last year.

“So to get back to work, we need working capital,” Nguyen Vinh Huynh, its deputy director, said.

“The difficulties caused by the pandemic and the cost of disease prevention are depleting our resources.”

Nguyen Dang Hien, general director of Tan Quang Minh Ltd, said access to bank loans had become difficult since many lenders announced expiration of their credit quota.

The pandemic had disrupted global supply chains forcing the company to look for alternative sources.

"The rise in transportation costs has increased the cost of raw materials.

“My company has shifted to buying raw materials domestically to cut costs and transportation time.”

Lich said to meet businesses’ capital needs the Government needed to help diversify sources.

It introduced a VND350 trillion ($15 billion) recovery programme and 2 per cent interest rate subsidy worth VND40 trillion, he said, adding it should accelerate these programmes and even consider further support to businesses.

In May, the Government announced it would subsidise interest on credit for companies, co-operatives and business households.

Besides, it has reduced corporate income tax, VAT and personal income tax and waived fines for late payment of taxes by businesses facing difficulties.

The support package is worth a total of VND21.3 trillion ($926 million).

These measures could not help businesses recover immediately, but would provide great support, experts say. — VNS

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