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City’s economy seen grappling with downturn   2009-03-04 - SGT


The HCMC economy is seen grappling with the widespread downturn, while major corporations are also struggling with falling orders and shortages of capital, according to a government-business meeting in the city on Monday.

Major indicators of the city’s economy have shown sharp contractions year-on-year, casting a gloomy outlook for the year 2009, according to a report issued by the city government at the meeting presided over by Chairman Le Hoang Quan. The meeting was attended by many departments, the HCMC branch of the central bank, business associations and many leading State-owned corporations.

Sharp contractions

Budget revenue of the city from domestic sources in the first two months fell by 10% year-on-year to slightly over VND19.15 trillion, or US$1.12 billion, mainly due to tax reductions and breaks, according to a report delivered by Truong Van Lam, office manager of the HCMC People’s Committee. The tax revenue from imports and exports was over VND3.8 trillion, down 18.2%.

Export earnings, a key driver for the city’s economy, totaled some US$2.63 billion inclusive of crude oil in the first two months, or a sharp fall of 17.5% over the same period last year.

Meanwhile, the most frustrating indicator was foreign direct investment, which stood at a mere US$69.9 million as of February 20, a plunge of as sharp as 95.6% compared to last year’s corresponding period, according to the report. Even the number of 40 FDI projects in the given period also declined by more than one-third.

To attract more new FDI as expected, Chairman Quan urged the Department of Planning and Investment to closely work with relevant agencies on measures to quickly license projects and halve the time for the licensing process.

He reiterated the importance of simplifying administrative procedures.

The only spotlight on the city’s economic picture in the first two months was retail sales of commodities and services, which increased 18.9% year-on-year to some VND42 trillion, or nearly US$2.5 billion.

Corporations face bleak outlook

Most leaders of big State-owned corporations at the meeting on Monday were downbeat about the economic vision for this year.

Nguyen Van Tho, chief executive officer (CEO) of Saigon Industry Corporation as a strong player in the mechanical engineering sector, said key business targets at his corporation had been revised down.

Revenues at the corporation’s subsidiaries are set at 90% of last year’s figures, while the revenue target for the parent company is 20% higher. Tho said the corporation planned to launch some new products to cope with the falling orders.

Similarly, Saigon Mechanical and Transport Corporation (Samco) also strives for a revenue equal to last year’s only, said Nguyen Tien Dung, general director of the corporation.

Dung said Samco’s bus factory in Cu Chi District was temporary closed during the first two months this year due to the lack of orders. However, the corporation by the end of February managed to sign some new contracts with clients in the north, so the factory could resume operations and maintain jobs for workers in the coming time.

Samco’s projected turnover is targeted at nearly VND12.5 trillion (US$730 million) this year, up a modest 2% over 2008, but the profit is estimated to fall by 30% to some VND260 billion only, Dung said.

While manufacturers in the city fret about falling orders, those in the trading and service sectors also feel the business stress.

Huynh Van Minh, CEO of Saigon Trading Group (Satra), spoke about the bleak outlook for the corporation’s subsidiaries in exporting farm and seafood products to key markets such as the U.S., Europe and Japan.

“My fear is to have no orders for our goods, not the lower prices,” Minh said.

In fact, some subsidiaries of Satra have closed down their catfish farmhouses due to fewer orders and difficulties in accessing loans to maintain operations, Minh added.

Nguyen Huyen, deputy general director of Saigontourist, said the high-profile company is strengthening cooperation with airlines and travel companies in launching promotion programs, aiming to attract more visitors from Asian markets given the slowdown in traditional markets like the U.S. and Europe.

Remove capital bottleneck

Most business leaders at the meeting called on authorities to come to their rescue, especially when it comes to financial issues.

Minh of Satra, who also serves as chairman of the HCMC Business Association, said many businesses, especially small and medium enterprises, failed to meet requirements to take out soft loans under the central Government’s subsidized lending program.

“We propose the State Bank of Vietnam allow commercial banks to give new loans for enterprises to pay old debts,” Minh said of the vicious circle faced by SMEs, who cannot secure new loans while yet to settle old financial arrears.

According to Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s HCMC branch, around VND200 trillion of soft loans (US$11.5 billion) would be pumped up for the city’s economy.

HCMC chairman Quan upon the proposal ordered agencies to help local companies, especially SMEs, to get financial assistance quickly and easily so that they can sustain their production and create jobs in the tough times.

Chairman Quan said to encourage investment, the city would help enterprises tackle their difficulties and obtain loans to expand their business. However, investment in infrastructure is essential though funds may be limited.

Chairman Quan promised that departments officials would be asked to go to business associations to find ways of assisting them rather than waiting for them to come asking for help. Furthermore, Quan and other city leaders would arrange their schedules to meet with business associations and corporations each month to hear their problems.

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