High logistics costs are one of the burdens hindering the recovery of enterprises. Photo: TCIT

Speeding up recovery

Mr. Pham Ngoc Hung, Vice Chairman of the Ho Chi Minh City Business Association, said, “the activities of enterprises in Ho Chi Minh City have started to prosper since the fourth quarter. Especially, enterprises that previously carried out production under the "three on-the-spot" option are all seeing promising developments.

Records in other sectors also showed a positive recovery. Mr. Do Phuoc Tong, Chairman of the Ho Chi Minh City Association of Mechanical and Electrical Enterprises (Hamee), said, “basically all businesses have recovered well and are racing to complete orders to deliver to customers in time. The previous implementation of "three on-site" helped businesses maintain a stable workforce, along with businesses in the association helping each other, so work returned to normal quickly. According to Mr. Tong, businesses under Hamee have recovered about 95% of capacity. Some enterprises are even operating at over 100% to meet the needs of customers.

Vice Chairman of the Ho Chi Minh City Textile, Embroidery and Knitting Association (Agtex), Pham Van Viet, said, “Ho Chi Minh City reopened on October 1, and since then businesses have focused on producing export orders and ending the autumn-winter season. Currently, enterprises are switching to producing goods for 2022.

Real estate businesses have also quickly transferred to the "new normal". Mr. Ngo Quang Phuc, Chairman of the Saigon Times Real Estate Club, said, “well-prepared businesses have now begun to bring their products to market, leading to the prosperity of real estate service business. "Currently, businesses are looking forward to the market at the end of the year after a long period of time having to suspend everything.”

Worries about rising costs

Although there has been a positive recovery in business activities, the profit goal of many enterprises has seemed impossible, especially in the face of so many difficulties. Mr. Pham Ngoc Hung said, “businesses have resumed operations, but there is no profit. As a result, businesses only operate moderately in the fourth quarter to resume relationships with customers and retain employees. A series of costs from raw materials and transportation have all increased, making product prices too low to bring profits to businesses. “Many businesses hesitate to start production because they don't know if the pandemic will flare up again, because many new units have gathered workers and worked for a few days but have had to close due to a F0 case. While small and medium enterprises have almost exhausted their accumulated capital.”

Sharing the same view, Mr. Do Phuoc Tong said, “"living with Covid" leads to the fear of more F0 cases appearing. Although the State's regulations do not require much testing, to ensure the safety of enterprises' operations, enterprises carry out testing weekly, even every three days. This leads to increased costs. In addition, when detecting F0, enterprises must have solutions to arrange alternative human resources or overtime to compensate.

Mr. Ngo Quang Phuc said, “over the past few months, real estate investors have been greatly affected by the increase in raw material costs. Because the price has been determined right from the moment the contract is signed with the construction unit, the cost increase is too high, making the construction unit unable to implement the project. Therefore, the investor and the construction unit have to sit down and discuss. Investors who have sold out of products cannot adjust the selling price with customers, so the only way to reduce profits is to share with the construction unit to ensure the progress of project construction. Because if the delivery schedule is not guaranteed, the penalty of the contract will cause more serious damage"

According to Mr. Phuc, for investors who have not sold or have just started announcing sales, they can recalculate the selling price, but if the price is too high, it will be difficult to sell.

In the textile industry, Mr. Pham Van Viet said, “transportation costs have increased to US $15,000/container, very high compared to only US $ 2,700 before the pandemic. In addition, the cost of raw materials also increased by 10-15% on average compared to before, of which the price of cotton increased by 20% and the price of yarn increased by 10%.

In addition to cost problems, recovering capital is also a difficult problem for businesses, especially small and medium enterprises. According to Mr. Pham Van Viet, the disruption of the supply chain, especially the consumption chain, greatly affects the cash flow of businesses. Due to the complicated pandemic situation, the main export markets of Vietnam's textile and garment industry can sell through online channels. Therefore, Vietnamese textile and garment enterprises must accept three months of debt to their partners, even if they have an order to reduce the price by 25% and allow a debt of six months. For enterprises producing goods for the domestic market, which is currently at the peak of production, the capital demand is also very high. "Large businesses can control cash flow and manage, but small businesses face a lot of difficulties in terms of capital," said Mr. Viet.

Faced with such difficulties, businesses recommend that the State's recovery support package should have a long term of two to three years, not too short, to be enough "dose" for businesses. As for the issue of capital, Mr. Pham Van Viet suggested that banks need to change their approach to create opportunities for small and medium enterprises. Mr. Viet suggested that banks can connect with a central enterprise of the supply chain, thereby spreading to enterprises in that supply chain. With this approach, the bank will control the cash flow of businesses in the chain, instead of requiring each small business to meet the criteria of collateral.