Vietnamese firms believe that business operations in 2014 will be brighter, according to the latest report by the Vietnam Chamber of Commerce and Industry. Photo baoninhthuan.com.vn

HA NOI (Biz Hub) – Vietnamese enterprises are optimistic about the prospects for business in 2014 on the expectation of improvements in revenues and production efficiency, according to the latest report by the Vietnam Chamber of Commerce and Industry (VCCI).

The report, which surveyed enterprises across the country in November and December, showed that 42.5 per cent of firms plan to expand their business operations in 2014, while 50.7 per cent expect to continue operations at the current scale. Only 6.7 per cent intend to reduce the scale of operations, while 0.1 per cent said they might suspend business operations.

For a majority of companies expanding their operations, the main reason was a better business environment and the availability of skilled workers at competitive salaries. The reason least cited for business expansion was an improvement in the protection of property rights.

The proportion of value added in the price of a product among the surveyed companies was about 19.5 per cent on average. To increase the added value of their goods, most Vietnamese enterprises believe they need to increase the competitiveness of their products and increase investments in machinery and technology, the survey showed.

When asked about how the government could help to increase the value added proportion of companies, 44.3 per cent of the participants said the government had to encourage the development of ancillary industries. Another 27.4 per cent of the respondents thought the government should implement programmes to support product design and diversification, while 24.6 per cent suggested the government should encourage technological innovation. Providing appropriate mechanisms and policies to build brand recognition and establishing a national programme to improve labour productivity were other suggestions.

The report also indicated that in 2013, market information and technology became the main drivers of production and business operations, and that the trend is likely to continue in 2014. This year, demand from the local market had the least impact on business decisions, although its importance is expected to increase next year.

On the impact of the legal environment for companies and the country's economic policies, the companies surveyed said that attitudes and the sense of responsibility among governmental agencies in 2013 had improved from the previous year. Nevertheless, the quality of legal regulations and policies in 2013 received the lowest score, although it had been highly appreciated by companies in 2012.

Approximately 60 per cent of the enterprises believed that the policies and solutions to support firms are fair, equitable and more than sufficient, while about 40 per cent of the respondents gave the policies and solutions a low rating. For solutions on extending the deadline for the payment of corporate income tax and value added tax, about 37.5 per cent of those assessed said the solutions vastly improved efficiency, while about 22.9 per cent thought the solutions added very little to efficiency.

In 2013, local firms found it increasingly difficult to borrow capital compared with the previous year. About 34.8 per cent said they had stopped lending because of high interest rates. While the interest rate was lowered in 2013, the rate was still too high for companies, according to the survey.

Han Manh Tien, chairman of the Vietnam Association of Corporate Directors, pointed out that in 2014 and 2015, if the interest rate is not lowered to below 12 percent, 70 per cent of firms would not be able to operate successfully.

Ta Dinh Xuyen, the deputy director of the National Centre for Socio - Economic Information and Forecast under the Ministry of Planning and Investment, agreed with the report's outlook that the economy would face better prospects in 2014.

"Inflation will be curbed next year. The exchange rate between the Vietnamese dong and the US dollar will be relatively stable, as the Governor of the State Bank of Vietnam, Nguyen Van Binh, has said it will not increase more than two per cent. The trade balance is also positive and our foreign currency reserves have increased. These are necessary conditions to ensure the economy remains stable," he explained.

However, he noted that despite the optimism, there were some difficulties in store next year, such as the increase in power and petrol prices, which are likely to affect local enterprises. 

"Enterprises are bound by six factors: production, market, inventory, bad debt, credit growth (access to capital) and investment. Among these six factors, I believe the most important element is the market, because even if a company increases production, its products will not be sold if there is no demand from the market. We can see that phenomenon very clearly in the property market. There were 140,000 unsold houses in 2013, and enterprises cannot sell their output of steel and cement any further. There should be more solutions for ensuring the output of firms is consumed," Xuyen added. --VNS