Improving the investment environment requires revolutionary stimulus | Business
Currently, 90% of companies in the country have a small and medium-sized or even very small scale of production. Therefore, it is not easy for businesses to access commercial loans or budget support. Ms. Le Nguyen Duy Oanh, Deputy Director of the Support Industries Development Center in Ho Chi Minh City under the HCMC Ministry of Industry and Commerce, said that in order to obtain loans, most companies must have guarantees. However, not all companies can meet this requirement. And yet, many companies have invested in export processing zones and industrial zones, but because the provinces and cities did not determine the rental prices of the land, these companies did not obtain certificates of entitlement. land use. As a result, companies cannot mortgage assets to have more investment capital.
Analyzing the barriers in lending activities, especially budget support, Mr. Nguyen Ngoc Hoa, chairman of HCMC Finance and Investment, state-owned company, said that there are regulations on the use of the support. budget that are no longer suited to business development. For example, in HCMC – where around 300,000 national companies operate, for many years the rental prices of land for investment and production have risen sharply, forcing many companies to relocate or expand their factories to neighboring provinces. and to leave their headquarters in the city. These companies are in dire need of capital support to convert production technology, but they cannot access the city support loans because their factories are outside the city’s administrative territory although their head office is still located in the city. This situation has also occurred in many investment funds of the state budget of the provinces. Not to mention that the administrative procedures related to lending activities, in particular budget support, are extremely difficult.
In fact, recently, many foreign investment funds have entered the capital supply market in Vietnam. As a result, credit agencies can manage working capital loans for businesses through contracts and invoices. However, the interest rates on loans are quite high, while domestic companies face fierce competition with foreign companies, so that they also cannot access this source of capital.
From another point of view, domestic enterprises also face the psychological barrier of “fear of growing up”. The situation of abusive companies harassed by specialized inspection and review activities of ministries and agencies is still very popular. When companies “emerge” it also means that they will be more “disturbed”. Therefore, many companies choose to “dive deep” to be “peaceful”. As the difficulties accumulate, many companies have chosen the solution “the smaller the boat, the less waves it encounters”. However, since the scale of operations is too small, there is no possibility of accumulating internal resources, so domestic enterprises are extremely vulnerable to shocks in the market.
In addition, although Vietnam is an exporting country among the world’s top 10 exporters in many areas, domestic companies are heavily dependent on imported raw materials. This causes domestic firms to develop in an unstable manner, which reduces their ability to sustainably compete in the global market. For example, the disruption of the global raw material supply chain from 2020 to today has stumbled many domestic companies. Mr. Do Phuoc Tong, Chairman of the Board of Directors of Duy Khanh Mechanical Company, said that in 2020, companies should look everywhere for alternative material sources. Since the start of this year, global supply has fallen sharply, causing commodity prices to soar. Prices for crude iron and steel are up 40 percent from the end of last year. Previously, many plastics manufacturers also had to announce product price increases to customers, as raw material prices jumped 30%. If this situation lasts for a long time, it will be very difficult for companies to maintain their export market share, as well as their domestic market share.
Speed up digitization
Information from the General Statistical Office of Vietnam shows that since the outbreak of the Covid-19 pandemic, more than 140,000 companies have had to leave the market. Another survey assessing the negative impacts of the pandemic on business operations also shows that up to 57.7 percent of businesses have a sharp decline in the consumer market. It should be noted that among companies with export activities, up to 47.2 percent of them confirmed that the goods could not be exported.
Mr. Tran Viet Anh, vice president of the HCMC Union of Business Association, stressed that the government has recognized the important role of the private economy in economic development. At the same time, however, there is a need to recognize the shortcomings of the private economic development ecosystem. In order for the national private economy to contribute more to economic growth, the government must radically remove the obstacles to administrative procedures for investment loans. In addition, there is a need to strictly punish ministries that maintain or still issue new unreasonable specialized barriers, resulting in economic losses for businesses. At the same time, the fact that authorities and localities take advantage of inspection activities to harass companies must be addressed.
In the long run, experts said the government needs to accelerate the digitization of the economy. Moreover, with the flow of foreign investment flowing massively into Vietnam, it is necessary to have a policy of “selective investment attraction”. As a result, the government should only attract quality FDI flows that are environmentally friendly, use advanced technologies, do not require labor and contribute to the economic growth and development of the country. In particular, priority should be given to companies that invest in the production of raw materials that serve the country’s main export industries and support sustainable export activities. Finally, there is a need to create venture capital investment funds to promote the start-up movement and create revolutionary impulses in economic development.
In addition, it is necessary to have targeted and appropriate investments in the market. Of which, for the domestic market, it is necessary to focus on support for enterprises to eliminate difficulties in the consumption of products, promote the program “Vietnamese favor the use of Vietnamese products”, support taxes and fees. export and increase activities to stimulate domestic consumption. For foreign markets, it is essential to carry out export promotion activities, continue to carry out activities to link supply and demand, trade promotion, help enterprises to create brands while exporting products. branded products, thus creating a base for Vietnamese products to enter foreign markets deeply and firmly.