Fear of rising costs overwhelms businesses

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The price of animal feed has increased by about 20% since the pandemic, greatly affecting businesses in the seafood industry. Photo: T.Hoa
The price of animal feed has increased by about 20% since the pandemic, greatly affecting businesses in the seafood industry. Photo: T.Hoa

Business expenses are higher than revenue

Reporting to Prime Minister Pham Minh Chinh at the National Conference between the Prime Minister and businesses on the morning of August 11, Truong Van Cam, Standing Vice Chairman and General Secretary of the Vietnam Textile and Apparel Association, said that textile and garment enterprises were facing difficulties and challenges at the end of 2022.

In particular, Vietnam’s textile and garment industry is mainly exported, so it is affected by geopolitical fluctuations. For example, high inflation in the US and Europe has affected the purchasing power of workers, reducing orders.

The conflict between Russia and Ukraine has also led to an increase in the price of input materials and transportation costs, about three times higher than in the last five years.

According to Nguyen Hoai Nam, Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers, the increase in production costs caused product prices to increase and competitiveness to reduce. In particular, the price of animal feed has increased by about 20% since the pandemic, while the price of animal feed in pangasius and shrimp products is accounting for 65-70%, which has a great influence.

According to a report by the Ministry of Planning and Investment, in the last months of the year, businesses still face many difficulties. In which, the price of gasoline, raw materials, input materials, and logistics costs increased, causing production and business costs, the cost of construction packages increased by 18-30%, and logistics costs increased by 3-5 times. The increase in costs of enterprises was higher than the increase in revenue in the second quarter of 2022 compared to the previous quarter and the same period last year.

Nam said that in the past two years, shipping and labor costs increased for reasons related to the pandemic, traffic congestion and now related to rising fuel prices. Currently, the cost of transporting a container to Europe has increased four times to US$10,000-12,000, and going to the West Coast of the US is at VND400 million. Many other input costs such as packaging, chemicals, transportation, and integration all increased.

Therefore, seafood enterprises in particular and enterprises in general need the attention of ministries and sectors to take measures to support and direct cost reduction, especially in reducing the price of animal feed.

About the impact of high fuel prices, Nguyen Quoc Ky, Chairman of the Board of Directors of Vietravel, said that air transportation was difficult, fuel prices were high, accounting for more than 60% of the cost, while the applied price structure for petrol was usually delayed after one month.

Thus, when the price of petrol is adjusted down, the airlines do not immediately benefit.

According to Le Quang Trung, Vice Chairman of Vietnam Logistics Business Association, logistics businesses highly appreciated the efforts and results achieved in operating and stabilizing gasoline prices. However, he said that it is necessary to continuously maintain and ensure stable gasoline prices like now, at least until the second quarter of 2023.

Additionally, concerning increased transport costs, Trung said that Vietnamese enterprises did not benefit, because profits “fell into the pockets” of large foreign firms. Therefore, he suggested that it is necessary to increase connectivity based on large logistics center platforms, necessary to support the development of Vietnam’s fleets and ports.

“Vietnam is a large importer of some goods, but Vietnamese fleets is still small compared to the world fleets, so it is necessary to have a mechanism to win the right to transport for 20-30% of import and export volume,” said Trung.

Reasonable price management

Facing the above difficulties, according to Pham Tan Cong, Chairman of the Vietnam Confederation of Commerce and Industry (VCCI), authorities need to actively improve the business environment, enhance national competitiveness with a focus on reforming administrative procedures, business conditions, and cutting costs for businesses, including expenses in terms of time, manpower, and money.

In addition, businesses and associations also wanted to prolong several support policies, create favorable mechanisms to encourage private investors, and timely support businesses in the face of pressure on prices and production costs.

The Prime Minister discussed this with delegates attending the Conference. Photo: VGP
The Prime Minister discussed this with delegates attending the Conference. Photo: VGP

Based on the opinions and recommendations of businesses and associations, Minister of Agriculture and Rural Development Le Minh Hoan said that problems of associations or enterprises needed the support, interaction, and companionship of State management agencies.

Regarding input materials, Prime Minister, Deputy Prime Minister Le Van Thanh has directed the Ministry of Agriculture and Rural Development to find ways to be self-sufficient in input materials, and the Ministry is also implementing it through associations and businesses.

According to Minister of Industry and Trade Nguyen Hong Dien, the Ministry will implement solutions to stabilize production, and ensure main balances, supply and demand for basic and essential goods such as gasoline, fertilizer, electricity, and coal with appropriate prices to support enterprises. Closely monitor gasoline price movements, and coordinate with the Ministry of Finance to regulate prices accordingly. Provide information, markets, prices, and changes in policies of importing countries so that enterprises can grasp information actively and flexibly in their production and business. And support to promote the digitization of business operations, contributing to reducing time and costs.

Sharing difficulties with businesses, at the Conference, Prime Minister Pham Minh Chinh directed ministries, branches, and localities to continuously support reducing taxes, petrol and oil fees, input raw materials for production and business; and research and development areas of raw materials to replace imported materials.

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