Businesses need further government assistance amid economic challenges

Hai’s transportation company, formerly a major player in the south, is on the verge of bankruptcy as plunging demand has depleted its accounts, and banks and other partners have come to collect debts.

Half of the company’s trucks have been sold amid the cash crunch. “We are trying to sell the remaining vehicles, but no one is buying because many other transportation companies are also selling,” Hai said.

Hai’s firm is among many businesses that are struggling to keep operations going amid a plunge in orders that has followed declining demand both domestically and internationally.

Over 88,000 companies have suspended operations in the first five months of 2023, according to the General Statistics Office.

Over 82% of businesses plan to scale down or close in the remaining months of this year, according to an April survey of 9,560 business executives conducted jointly by the government’s Private Sector Development Committee and VnExpress.

Some 71% want to reduce their workforce by more than 5%, while 22% aim to cut it by half. Some 81% have a “negative outlook on the economy this year.”

To save businesses, cash is key, experts have said. “Cash is the lifeblood of businesses, and they need it more when they are weak,” said Trinh Xuan Anh, a lawmaker from the southern province of Dong Nai.

Loan interest rates of over 10% a year are reducing the chance for businesspeople to keep their companies afloat.

“The Prime Minister has been calling for lower interest rates, but in fact the reduction has so far been minimal,” Anh said, adding that the government could cap loan interest at 9% to ensure funding for businesses, even though the move would be an unprecedented policy.

Nguyen Tu Anh, a government economic consultant, said that with loan interest rates of around 10%, businesses are paying a 12% of GDP in total interest, and a reduction of only one percentage point would support the economy with over VND113 trillion ($4.81 billion) in extra funds.

Nguyen Manh Hung, a member of the National Assembly’s economic committee, said that the committee has proposed that the State Bank of Vietnam (SBV) remove the credit growth cap, which is now at 14%, to encourage lending.

The Private Sector Development Committee has also proposed that a new credit package be issued for key sectors, and for small and medium enterprises.

It has also been proposed that the government allow commercial banks to redeem their bonds prematurely.Businesses have additionally lobbied for the Value-Added Tax (VAT) rebate of 2 percentage points be extended through the end of 2025 instead of having it only apply to the last six months of this year as it currently does.

Another obstacle is bureaucracy.

Hung said that the National Assembly needs to untangle the legal knots that companies are facing in the property, transport and public investment sectors.

Businesses have also argued that they should not be inspected more than once a year at most, no further tax and administrative burdens should be placed on them, and business relationships should not be “criminalized.”