Many small enterprises hit the wall

Saturday, May 23, 2015 12:31

Workers make products from limestone at R.K Marble Vietnam Co, Ltd in the northern province of Yen Bai's Luc Yen District. About 3,000 small enterprises have closed down and 19,000 others temporarily stopped operations in the first four months of this year. — VNA/VNS Photo The Duyet
HCM CITY (Biz Hub)— For the first four months of this year, 3,249 small enterprises have closed their business, and 19,000 others temporarily stopped operations, a survey conducted by the Viet Nam Chamber of Commerce and Industry (VCCI) has found.

Most of the companies had under VND10 billion (US$480,000) of registered capital.

The number of enterprises temporarily stopping operation increased by 4.5 per cent, though the number of enterprises closing fell 0.8 per cent compared with last year.

"The development of small- and medium-sized enterprises (SMEs) is very important for any economy and if SMEs can't develop, the Vietnamese economy will find it hard to grow in a sustainable way," Nguyen Hoang, president and CEO of N&G Corp, was quoted as saying in Dau Tu (Viet Nam Investment Review) newspaper.

"The economy cannot only be based on big State and private corporations, but must also include SMEs," he said.

SMEs face a sharp decline in turnover and profit, and fewer qualified human resources, while big corporations have experienced business recovery and are recruiting more staff.

More than 60 per cent of very small enterprises and 50 per cent of small enterprises cannot reach their target for their annual turnover. For medium and big enterprises, the figures are 45 and 47 per cent, respectively.

"The size of enterprises has affected business efficiency," Hoang said.

Two causes for losses at small enterprises are the lack of capital and markets.

"Viet Nam hasn't been successful in joining global production chains, which is the most important thing in the consumption market," Hoang added. "After consumption markets, the next challenge is financial resources," he added.

In the report, 44 per cent of enterprises said they did not meet the requirements to borrow loans from banks because of their low profits as well as the high interest rate on loans.

High expenditures for production and a lack of skilled workers were other challenges.

Despite these problems, the other enterprises in the survey said that for the first four months of the year, international and national market demands had significantly improved.

Along with a slight decrease in production expenditures, easier access to bank loans had also helped them expand their businesses. — VNS

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