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Lower purchasing power causing headache to SMEs   2008-11-19 - Viet Nam Net

Of the two permanent problems of businesses, capital shortage and the outlets of products, the outlet deadlock which is due to the lower purchasing power proves to be the biggest worry for businesses now.


Nguyen Danh Truyen, Director of the Hanoi Shipbuilding Joint Stock Company, said that the thing that worries him most now is the decreased number of orders due to the stagnation of the national economy.


Truyen said that everything will be okay if the company has to get loans at high interest rates, as long as it can still receive orders. If so, the company can still make a profit, though a smaller one. However, as orders do not appear to be coming any more, the company fears it cannot maintain production.


The companies that make consumer products and the products serving the local construction industry have also made the same complaints.


Nguyen Ngoc Thuc, Head of the Hanoi Office of Hai Phong-based Bach Dang Plastics Company, specializing in making plastic pipes for water drainage systems at construction works, said that the consumption has decreased by 10-20% over the same period of the last year. Meanwhile, FSC, a steel producer, complained that it is facing huge difficulties with the high stocks caused by the sharp purchasing power decrease.


The companies that make products for export prove to be the ones suffering the most. Nguyen Dac Hanh, director of the Hai Phong-based Shinec Interior Products Company, which specializes in making products for export to Europe, said that all partners have cut orders or have not defined the orders so far.


“In principle, it is now the right time for foreign partners to sign contracts for the whole year of 2009. However, they have not made any decisions. They said they still need to consider the market and will make a decision in April 2009,” Hanh said.


Hanh said that his company has suffered a heavy loss as the South Korean partner canceled the contract with Shinec due to the yuan/US$ exchange rate fluctuation.


Having realized that Shinec cannot expect too much from the orders from overseas, Hanh has decided to develop the products for domestic consumption. However, he admitted that the sales on the domestic market prove to be unsatisfactory.


“The domestic market proves to be the good choice in the stable macroeconomic conditions. However, it is now a very difficult moment,” Hanh said, recalling the same period of the last year, when a lot of big orders came and he had to refuse many of them. Meanwhile, he has to accept all orders now in order to maintain production.


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