The first seism

The “first
seism” is the word that enterprises use to talk about the dramatic increases of
the prices of electricity, petrol and dollar. The price increases which came in
succession have dealt a staggering blow to enterprises, which now have to rack
their brain to cut down expenses to make profits. A lot of businesses say “they
have to lower the profit targets for 2011.” Others say “they dare not dream of
making profit. They just wish to retain the market.”

Nguyen Khac
Tung, Deputy Marketing Manager of Huu Nghi Confectionary Company in Hanoi said, “The latest
sharp devaluation of the dong by 9.3 percent has made us puzzled.”

“The dong
depreciation and the input material price increases have forced us to raise the
sale prices of our products. However, if so, we will face difficulties in
selling products; because we have to compete with cheaper Chinese products,”
said Do Hai Trieu, Head of the Technical and Marketing Division of Rang Dong
Light Source & Vacuum Flask Joint Stock Company.

Trieu has
urged management agencies to apply necessary policies in order to support
businesses to carry out the projects on making high-efficiency products. In the
long term, it is necessary to install strict technical barriers in order to
prevent low quality foreign products from invading the Vietnamese market, which
will harm consumers and kill local production.

Nguyen Van
Qua, General Director of Bao Ngoc Sweet Company, complained that everything is
getting more expensive, from electricity, to gas and petrol; which has forced
Bao Ngoc to raise the sale prices, even though Bao Ngoc does not want to do
this; because higher price may lead to lower purchasing power.

“It would
be better if the decisions to raise prices are at different intervals, instead
of being made at the same time, because the consecutive input material price
increases will push the prices of finished products up,” Qua said. “The government
should have allowed raising the petrol price three months before it allowed raising
the electricity price.”

The second seism

While
enterprises are still busy thinking about how to cut down expenses to reduce
the production costs, they have been urged to consider possible impacts of the
earthquake and tsunami in Japan
on their business.

“The
unpredictable changes after the earthquake and tsunami in Japan will certainly affect Vietnam. This
is a burning issue now which businesses must not ignore,” said Pham Chi Lan, a well-known
economist in Vietnam.

Japan is now the biggest ODA (official development
assistance) provider to Vietnam,
which provides 30 percent of total ODA Vietnam can receive from foreign donors
every year. Japan
funded projects always have the highest disbursement rates. The projects also
bring modern Japanese technologies to Vietnam.

Some
forecasts have said that Japan
will lack cooking after the natural calamities. What should Vietnamese enterprises
do in such a context?

Lan has
caught the business attention of two issues. The increasing food prices in the
world could be the good opportunity for Vietnam, a big rice exporter. Also,
Vietnam
is facing challenges in climate change and the salting infiltration in Mekong
Delta.

The
domestic market will witness stiffer competition between Vietnamese and foreign
manufacturers. By that time, Vietnam
will have to fulfill its commitments on cutting taxes. The import tariffs on
the Chinese imports will be cut to 0-5 percent, which will make foreign goods
cheaper on the domestic market.

However, Le
Xuan Nghia, Deputy Chair of the National Finance Supervision Council has given
optimistic forecasts about the business environment. He said “the current high
lending interest rates will begin going down in the third quarter. This will
help ease the burden on businesses, and will also help the stock market
recover.”

Pham Huyen