HCMC Business Association Chairman Huynh Van Minh called on banks to show more understanding for the tough times businesses were experiencing because of spiraling costs.

Business leaders have called on the government to step in and stabilize prices.

“Otherwise, once contractors stop building, ongoing construction works will halt, the country’s already weak infrastructure will have no chance of improving, businesses will suffer losses, the government will miss out on tax revenue and hundreds of thousands of poor workers will lose their jobs,” Minh told a meeting organized last week by his association.

Industry and construction accounted for 42 percent of the economy in the first quarter, the General Statistics Office reported last week.

Growth in the industry and construction category was 8.2 percent in the three-month period, down from 9.1 percent in the same period a year earlier.

Higher costs are slowing construction projects.

The latest official inflation figures, released last week, show the price of housing and construction materials were 20.6 percent higher in March compared to 12 months ago.

The chairman of the HCMC Construction Association, Nguyen Ngoc Khanh, said construction sector costs had shot up by 40 percent this year and could continue to rise.

Except for large companies, Khanh said most of the 7,000 other businesses in his association were on the brink of bankruptcy.

But construction is not the only sector to be hit hard by rising prices.

A tra (catfish) farmer, who breeds 15,000 tons of fish, told the meeting he had cut prices to sell more stock to pay for increasingly expensive fish feed.

Because the feed prices had soared and banks were reluctant to provide loans, he had been forced to slash the fish’s daily food portions by half in the past month.

The farmer told the meeting he was losing around VND3.5 billion US$218,750) a month - “My business is dying,” he said.

Banks have tightened credit after the central bank raised interest rates and mandatory cash reserves in an attempt to control inflation.

The association’s chairman, Minh, said the government should compensate businesses for rising prices, especially oil prices, and temporarily reduce certain types of business taxes, as well as supervise market pricing more closely.

Businesses rise to the challenge

While the government is yet to offer its aid, many businesses are trying their best to deal with the problem.

Chairman of HCMC-based Thinh Phat Production and Trading Co., Vo Tan Thinh, said his company was determined to minimize costs as prices soared.

He said the company had recently reduced the size of its business department, with each employee having to handle three to five contracts at the same time.

Thinh Phat has also slashed the time input materials were stored prior to production.

Instead of stockpiling materials five to seven days before use, the company keeps materials in warehouses for only two days now.

International Aqua-product Company’s President Tran Tan Thuat said his company had developed a new initiative in the face of price pressures.

Because bank loans were hard to secure, the company was selling fish food through an installment plan.

The company will receive 50 percent of the price upfront and the remaining payment after the breeders’ fish is sold abroad by exporting businesses.

Thuat said if the company, the breeders and exporters did not help each in these hard times, they would all “die” together.

Textile initiatives

Perhaps the most effective and concentrated efforts to cooperate came from the textile sector, where businesses were helping each other

not only to save but also to charge higher export prices to offset rising input costs.

Members of the HCMC Association of Garment and Textile Embroidery and Knitting (Agtek) have visited Thach Binh Garment and Garmex Js to learn about the two companies’ effective saving solutions.

Thach Binh has started to use a coal-fueled boiler for its ironing system, which costs 30 percent to 35 percent less than a petroleum-fired boiler.

Garmez Js has also introduced a new production process that boosts productivity by at least 15 percent.

Agtek’s most important initiative, however, is its collective effort to increase export product prices.

The organization’s secretary general, Bui Trong Nguyen, said most member businesses had demanded prices 10 to 20 percent higher when negotiating contracts for this year’s second quarter.

Binh Hoa Garment’s president Phung Dinh Ngo said his company had secured a contract to export 30,000 shirts to the US at a price 10 percent higher than the first quarter.

Ngo said the collective bargaining was such a success that customers had agreed to increases as high as 20 percent.

Vietnam Textile Association Deputy Chairman Pham Xuan Hong said such success was the result of the textile sector’s “solidarity.”

Source: TT, TBKTSG