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Capital-starved businesses and unemployment in Vietnam

Capital-starved businesses and unemployment in Vietnam

Thursday 02, 05 2024
Businesses in many sectors are still capital-starved, creating few jobs despite general signs of economic recovery.

Considerable difficulties 

The latest data on the economy in the first quarter shows that the industrial and construction sectors grew nearly 6.3%, several times higher than the growth rate of the same period last year and higher than other economic sectors.

However, in reality, construction businesses are facing considerable difficulties. This information was shared by Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors (VACC), at a recent forum on stimulating new growth momentum.

According to Mr. Hiep, this paradox is caused by the fact that in recent months, public investment has increased significantly, leading to an increase in the growth target of the construction industry.

However, construction businesses engage in various types of projects, such as technical infrastructure construction, while some engage in civil construction projects.

Regarding large projects such as highway construction projects that have been promoted recently, most of them are very large contracts, with only a few conglomerates participating in technical infrastructure contracts having employment opportunities.

The rest, due to the sharp decline in private investment in real estate, have made it very difficult for most small and medium-sized civil construction companies.

In addition to employment issues, construction businesses also face a problem related to working capital debts. For example, Delta Company carried out The Artemis project in Hanoi with a construction contract worth over 400 billion dong, but up to now, more than 60 billion dong remains unpaid despite completion for 7 years.

Employment issues in Vietnam 2024

This is the situation of many construction businesses when they invest money in purchasing materials in advance but cannot demand payment due to some issues with the mechanism.

Mr. Hiep further explained that for state investment mechanisms, as the state is the investor, there is no need for a guarantee mechanism. However, private investment projects also operate under this principle, leading to many projects unable to claim payment.

Therefore, according to Mr. Hiep, there needs to be a "revolution" in the mechanism for managing the construction industry, especially in the issue of contracts between investors and contractors.

Regarding the timber industry, Mr. Ngo Sy Hoai, Vice Chairman of the Vietnam Timber and Forest Product Association (VIFOREST), said that currently, input costs have increased, including labor costs, but prices have not matched.

The reason is that most businesses produce according to foreign orders, being forced to lower prices significantly, meaning less value creation.

Mr. Hoai also noted that the optimistic outlook for recovery and growth does not seem to apply to all industries.

For the timber supply chain from plantation forests of farmers, forest growers to wood processing and export businesses, there are still some institutional, legal enforcement cost issues, such as VAT refund, still unresolved in some localities.

Many regulations "strangle" businesses

Mr. Mac Quoc Anh, Director of the Institute of Economics and Business Development, said the two biggest difficulties for small and medium-sized enterprises are lack of orders and access to capital. Following that are administrative procedures and concerns about criminalization in economic activities.

Accompanying solutions include aggressively expanding the export market to stimulate orders. Along with that, it is necessary to open up sources of capital by addressing issues with bonds, bank capital, and inefficient funds.

Solutions proposed for capital and employment issues in Vietnam 2024

At the same time, it is necessary to review and simplify remaining administrative procedures; strengthen measures to further consolidate the confidence of the business community and private investors.

Similarly, Mr. Nguyen Tu Anh, Director of the Center for Economic Analysis and Forecasting, noted that the difficulty in accessing capital for businesses is still present because the corporate bond market has not become a supportive channel for businesses.

Along with that, the real estate market has not shown signs of recovery. These two factors will impact the economy's supply capacity and need to be addressed in the near future.

Source: theleader

Compiled by VietnamCredit

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