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Businesses Respond to Macroeconomic Policies (3/6)
03/06/2011 - 12 Lượt xem
At the seminar, participants spoke about the macroeconomic situation, inflation and the Government's policies related to foreign exchange and interest rates as well as business reactions to the new situation.
The macro-economy's affect on business
Associate Professor, Dr. Le Xuan Ba, the director of the Central Institute for Economic Management under the Ministry of Planning and Investment, said that in 2010, the Vietnamese economy achieved good results in almost every field, while at the same time revealing some limitations in the face of certain challenges. In the first quarter of 2011, the consumer price index (CPI) increased 6.12 percent compared with December 2010, and in April, the CPI rose 3.32 percent. Thus, in the first four months, inflation reached 9.64 percent (breaking the National Assembly-set target of keeping inflation below seven percent in 2011).
On February 24, 2011, the Government promulgated Resolution 11/NQ-CP proposing six solutions to curb inflation: 1) implementing tight and cautious monetary policies; 2) tightening fiscal policies, cutting public investment, reducing overspending from the State budget; 3) promoting production and business, encouraging exports, curtailing the trade deficit, ensuring energy efficiency; 4) adjusting electricity, petrol and oil prices along with providing support for poor families; 5) intensifying social security; and 6) boosting information and propaganda in order to improve the awareness of businesses and people.
Economists shared the opinion that the solutions were necessary to maintain macroeconomic stability, ensure social security and curb inflation. However, the solutions would considerably affect the business community. Specifically, tight and cautious monetary policies would cause numerous difficulties for businesses, especially production and trading companies which are heavily dependant on loans. Currently, the highest interest rate offered by the State Bank of Vietnam to depositors is 14 or 15 percent per year, and the annual interest rates applied to the borrowers range between 17-19 percent. In comparison with the financial capacity of domestic businesses, such interest rates are high and reduce their capability to make a profit. Difficulties in accessing capital is one of the major reasons for the sluggish rate of investment in production, which is adversely affecting the entire economy and the lives of workers.
Cutting public investment will have a considerable impact on businesses, especially companies which are operational in the fields of construction and installation. Adjustments to electricity, petrol and oil prices will also affect companies in almost every sector.
Business reactions
Seminar participants said that every company had to cope with the changes in the macroeconomic situation and new Government policies, depending on the actual condition of the company and the actual situation in the sector or field in which it operates. A common thing which all businesses must do is practice thrift.
Nguyen Thanh Hoan, the general director of the Underground Works Construction Joint Stock Company (Vinavico), said that ensuring company savings should always be considered by companies in contributing towards their earnings, and therefore Vinavico. In his opinion, every company must not only save electricity and production materials, but also assess its financial capacity and choose suitable business options in order to avoid wasting time and money on ineffective business activities.
Dinh Thi My Loan, the vice president and general secretary of the Vietnam Retailers Association, said that to cope with the current changes, companies must be more practical and dynamic. Specifically, they must be aware of how macroeconomic policies can affect their operations and work out appropriate plans to cope with the impact.
In the opinion of Dinh Thi My Loan, retail companies must be aware of the impacts of inflation on their operations as well as on companies which supply goods. In addition, they must assess the business environment and the capacity of their competition rivals. It is also necessary for them to work out appropriate investment plans, effectively manage prices and stock. Furthermore, they must make suitable business plans which help them adapt to economic and financial changes. Retail companies must keep up to date with market forecasts and predict changes for the next three, six or nine months. /.
Source: VEN
