Interest rates down: Business capital absorption remains weak

(Baonghean)To resolve difficulties for businesses and support the market, implementing Resolution 13/NQ-CP; the State Bank continuously adjusted interest rates to reduce pressure on borrowing costs for businesses. However, in the context of a weak economy, declining purchasing power, large inventories... the capital absorption capacity of businesses is still weak...

Coming to the province's industrial parks (IPs): Nam Cam, Bac Vinh, Nghi Phu, we can clearly see the difficulties in business operations. In general, all 3 IPs are quiet, lacking excitement. Besides some units still trying to maintain production, many factories have closed silently, despite the grass and dust covering the premises.



Difficult output, businesses reduce demand for loans to invest in production.

Mr. Nguyen Dinh Sinh - Director of Austdoor Nghe An Joint Stock Company (in Nghi Phu Industrial Park) shared: Recently, bank loan interest rates have decreased but the economic situation is difficult, customers' purchasing power is low, so businesses do not borrow much capital. There were times when interest rates were high, our businesses had to borrow capital with interest rates up to 21.3%/year, up to now it has decreased to 13%/year but businesses do not dare to borrow more capital to invest in production. In previous years, the capital demand for loans was 6 - 7 billion VND to serve production, this year we only borrowed 3 billion VND. Currently, the real estate market is frozen, urban apartment projects have stopped implementation, our rolling door and Austdoor plastic door products are consumed slowly. While other production costs have increased, the selling price of products has not increased. In the first 7 months of 2012, the revenue has only reached 60% compared to the plan.

Ms. Nguyen Thi Loan - Deputy Director of Viet My Company Limited (in Nghi Phu Industrial Park) confided: In previous years, production and business were favorable, there were times when the loan interest rate was as high as 23%/year, but the capital demand was still high. Now, we can borrow capital with a low interest rate of 12%/year, but the capital demand of businesses is very low because the products have no output. Our company specializes in producing NPK fertilizer and trading, the products mainly serve the agricultural and rural markets, but the weather is increasingly complicated, natural disasters, agricultural production is unstable, ineffective, and crop failure. In addition, the input price of fertilizer materials is high, while the output price for agricultural products is low, farmers cut down on investment for production. The company often lends fertilizer to people from the beginning of the production season, and only pays at the end of the season (without interest), but consumption is still low. This year, fertilizer consumption is only about 60% compared to the same period last year, with a lot of inventory. The bank is offering us cheap loans, but the company does not dare to borrow more because the products have no output.

Sharing the same thought, Mr. Le Xuan Dat - Director of Trung Do Granite Brick Factory (in Bac Vinh Industrial Park) said: This year is indeed an extremely difficult year, especially for the Construction industry. Tile manufacturing units like us have to face many pressures, the domestic market is too difficult to consume, fierce competition with cheap Chinese bricks, increasing input material prices, increasing electricity prices, increasing gasoline prices pushing up transportation costs...

Meanwhile, output had to decrease due to large inventories, having to sell off goods to support staff, workers, and maintain machinery. In the first 7 months of 2012, Trung Do Granite Brick Factory consumed nearly 1 million roof tiles and 1.2 million square meters of floor tiles, down 20% compared to the same period last year. Low consumption output, the factory limited production, so the demand for loans was lower. The policy of reducing interest rates created conditions for businesses to significantly cut costs, but in the current context, if the goods produced cannot be consumed, capital is cheap and difficult to absorb. This year, we just hope that our operations can break even, that's good enough!

Interest rates have decreased, but what businesses need more at this time is a consumer market and an outlet for their products. Only when purchasing power increases and the circulation of goods stabilizes will production be promoted and the ability of businesses to absorb capital be increased.

Quynh Lan