High inventory volume remains the biggest threat to enterprises. Not only expensive products such as cars, motorbikes, but essential goods such as fish sauce have also been selling slowly.
Essential goods also left unsold
Some months ago, when big industrial manufacturers complained that they could sell products due to the weak demand, household goods manufacturers still kept unruffled, because they believed that consumers would only cut down expenses on luxurious products, while they would still have to buy food and other essential goods.
However, Cao Sy Kiem, Chair of the Small and Medium Enterprises’ Association, has affirmed that the unsalability has become serious, because people even do not have money to buy essential goods.
The Nha Trang Fish Sauce Association has said that its member workshops have to scale down the production. Though fish sauce is needed for people in their daily meals, the sales of fish sauce have still been slowing down. Some fish sauce companies have to keep the production at a moderate level since the beginning of the year.
“This shows that the market demand has fallen too sharply. The thing that businesses most expect from the Government now is the measures to stimulate the demand,” Kiem said.
The PMI Index (Purchasing Managers Index) in May 2012 released by HSBC showed that the business conditions of the production sector in Vietnam were worsening. The bank’s report showed that the PMI in the sector decreased from 50 points in March to 49.5 points in April and further to 48.3 points in May 2012.
The declines in production have been reported in most of industries, from textile and garment, footwear to plastics, from automobile, steel to electronics. Though it is now the highest garment production season of the year, most of garment companies still have been moving heaven and earth to seek orders.
According to the Vietnam Textile and Apparel Association Vinatas, big garment companies have reported the 10 percent decreases in the number of orders in comparison with the same period of the last year. Meanwhile, small companies are believed to lack 10 percent of orders.
Other industries including cement, steel, cars, motorbikes and electric equipments have to scale down the production since the beginning of the year already. The enterprises in the fields are running at 50-60 percent of the designed capacity.
Especially, even petroleum products have also been selling very slowly with the inventory volume of 106,000 tons, though the Dung Quat Oil Refinery has halted operation for regular maintenance.
Banks refuse inventories as mortgaged assets
The Ministry of Finance has announced the bail package worth 29 trillion dong. However, experts have estimated that the actual sum of money reserved for businesses would be some 9.5 trillion dong only, which is really a modest sum of money in the current difficult circumstances. Economists have pointed out that the bail package would help increase the total demand by no more than 0.8 percent.
Enterprises now expect the public investment package worth 120 trillion dong, and the 38 trillion dong worth of government bonds, which are believed to create big demands.
However, worries have been raised that if such a big sum of money is put into circulation within just a short time, this may lead to the return of high inflation.
Since manufacturers cannot sell products, they do not have capital for re-investment and production.
Some commercial banks have announced that they would consider accepting inventories as the mortgaged assets to provide loans to businesses, if the inventories can meet the banks’ requirements.
However, the method proves to be unfeasible. Businesses keep complaining that banks refuse to provide loans because they fear risks.