Challenges of enterprises in late 2022, early 2023 and recommendations to the Government

Enterprises face double difficulties in the last months of 2022 and early 2023

Along with difficulties in import and export activities, businesses also face challenges in accessing capital and problems related to the business environment.

On November 12, the Research and Development Board of the Private Economy (Advising Council on Administrative Procedure Reform) (Board IV) had a report No. 16/Board IV sent to the Prime Minister in which it summarized and reported on: Report the biggest challenges of enterprises in the last months of 2022 and early 2023.

Enterprises are facing double difficulties

Enterprises in most categories of products have said that export and import activities in the second half of the fourth quarter of 2022 and the beginning of 2023 will face many difficulties compared to the results of the third quarter of 2022.

First, In terms of market opportunities, orders for 2023 with many key export industries all decreased seriously, especially in the textile and garment industries, footwear, furniture, industrial aluminum, iron and steel, cement, etc. enterprises had to cut workers and reduce production scale in the last months of 2022.

The cause of the decline in orders was mainly from two factors: Tight monetary policy to combat inflation and the risk of economic recession in many European countries, the US as well as globally, causing consumption and investment demand to fall sharply; the trend of increasing frequency of trade remedy investigation cases against Vietnamese goods, especially from the US side, makes many Vietnamese enterprises passive and face many disadvantages in market access.

Second, input costs for production and export in Vietnam are high and tend to continue to increase, reducing the competitiveness of enterprises in international markets. This pressure comes from factors including: World oil prices may be pushed to a high level, gasoline shortages in major economic centers of the country such as Hanoi, Ho Chi Minh City has not been removed, causing transportation costs to increase sharply; the VND/USD exchange rate increased sharply, in the context that over 90% of Vietnam’s total import turnover is raw materials for production, increasing input costs, and at the same time putting pressure on the domestic production price level; interest rates increase rapidly, causing the cost of production capital of Vietnamese enterprises to increase; The risk of disruption and disruption in the supply of input materials for production still exists when China continues to maintain the “Zero Covid” policy.

In addition to the decline in orders, many industries and businesses also face some particularly great challenges.

First, The challenge of accessing capital makes it difficult for businesses, especially private enterprises, to maintain production, business, purchase and prepare raw materials for production periods in 2023 as well as maintain jobs for workers. The problem becomes more serious because the cash flow of businesses has dried up after more than 2 years of the epidemic.

In particular, steel enterprises faced a “major crisis” when supply exceeded demand sharply, while export orders and domestic orders simultaneously decreased sharply. Many businesses have to sell products at 30-40% lower than cost to have operating cash flow with very high interest costs, while waiting for the next credit allocation.

Enterprises in supporting industries could previously use signed contracts or mortgage real estate to borrow capital, but now banks do not disburse due to pressure on credit room, so businesses cannot continue to receive and sign a new contract….

As for agricultural enterprises, they reflect on the lack of capital to purchase raw materials while some agricultural products have a concentrated purchasing period in the last months of the year and early 2023.

Second, businesses face the challenge of maintaining medium and long-term capital mobilization channels for investment expansion and business recovery. The effect of the market’s decline in confidence in real estate businesses has spread to all other types of businesses, making the bond mobilization channel unable to help businesses attract investors in the short term. solve urgent problems.

“Difficulties in cash flow, including working capital and medium and long-term investment capital, are putting businesses, especially Vietnamese private enterprises, in extremely difficult situations”, the report highlights.

Challenges of enterprises in late 2022, early 2023 and recommendations to the Government - Photo 1.

Enterprises in the woodchip industry call for help because of VAT refund

Third, barriers from the implementation of regulations and laws related to the business and investment environment of enterprises have affected the business community’s confidence in the business environment.

Specifically, the issue of VAT refund for export products of the wood and rubber industry is facing many obstacles with a complicated origin verification process, inconsistent ways of doing things between localities, and inconsistency between time and place. Verification time is published (40 days) with actual time (maybe up to many months or even years), depositing capital with very large amounts. At this time, the delay in tax refund creates a great challenge for businesses, because they are facing cash flow difficulties.

Many recommendations are proposed to the Government

Stemming from the difficulties and challenges facing the business community, in order to partially overcome difficulties for import-export businesses, especially to reduce the passivity of market signals, Board VI and the The association suggested the Prime Minister direct the Ministry of Industry and Trade to coordinate with specialized ministries to periodically provide updated information on fluctuations and trends of major import/export markets, accompanied by assessments about opportunities and challenges for businesses to have appropriate adaptation plans.

In order to support the recovery efforts of enterprises, especially for domestic private enterprises in the context that enterprises are facing great difficulties in cash flow, Board VI also proposed the Government to consider extending it until the end of the year. In 2023, a number of policies to support businesses have been brought into play during the Covid-19 pandemic, such as: 2% VAT reduction policy; the policy of extending/postponing the application of the new land rental tariff according to the Government’s Decree No. 96/2019/ND-CP dated December 19, 2019; credit policies such as restructuring the repayment term, keeping the debt group unchanged, etc.

In order to maintain the confidence of enterprises in the investment and business environment of Vietnam, it is proposed that the Government direct ministries and sectors to strictly and substantively implement the consultation and consultation process, the area to develop relevant legal documents, not only consult a few representative units. At the same time, focus on reviewing, improving, and promoting the onlineization of a number of groups of processes and procedures that have a high frequency of implementation and affect most businesses, such as the group of procedures for business start-up, commerce, trade, investment procedures, taxes, etc…and remove the focus of proposals on VAT refund for enterprises in the wood and rubber industry.

For challenges related to the financial market, the Government proposes to direct the Ministry of Finance and the State Bank to consult reputable domestic and international financial and policy experts to assess the context and identify solutions. In case of necessity, it is proposed to take into account special solutions in a certain period to rescue businesses and the economy.

In addition, in order to increase the efficiency of the use of credit lines in 2023, helping capital flows to support businesses in many industries and fields, the Government proposed to direct the State Bank to work with banks. trade to research and design preferential credit packages for key domestic manufacturing industries and fields, including items for small and medium-sized enterprises so as not to destroy business capacity.

The issue of VAT refund for export products of the wood and rubber industry is facing many obstacles with a complicated origin verification process, inconsistent ways of doing things between localities, and inconsistency between verification times announced (40 days) with real time (maybe up to many months or even years), depositing capital with a very large amount. This issue has been reported to the Prime Minister by Board IV in the April-May reporting period, 2021. At this time, the delay in tax refund creates a great challenge for businesses, because they are facing cash flow difficulties.

Vietnam Economic News | Nguyen Hanh | 12-11-2022

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