“Some businesses take 149 years to sell off all their real estate inventory”
Vietstock – “Some businesses take 149 years to sell their entire real estate inventory”
Financial constraints and large inventories make business operations difficult. According to statistics, the inventory period of some real estate companies is as high as 54,334 days.
A preliminary analysis of the financial statements of 1,579 companies listed on the Stock Exchange (10 industries), the Private Economic Development Research Association (Fourth Division) stated that from mid-2022 to the end of the second quarter of 2023, revenue in all industries declined. The worst offenders are real estate and construction groups.
As a result, eight out of 10 industries reported lower revenue in the first six months of 2023 than the same period last year. Only the information technology industry grew in size; consumer goods and services remained unchanged.
On-site businesses continue to face cash flow issues. Because even listed companies, with weak equity and greater reliance on loans, are facing current challenges when raising funds (reduced orders, difficulty in raising bonds and stocks, and difficulty in obtaining bank funds), companies will face immediate difficulties.
The real estate and construction industries were also mentioned as the groups with the biggest cash flow problems when inventory days and receivable days (the average time to collect debt after a sale) increased many times.
The results of the fourth segment show that in the first quarter of 2023, the average number of days of accounts receivable for construction companies was 1,165 days, an increase of 2.5 times compared with the same period last year; the average number of days of inventory was as high as 4,527 days, an increase of 6.8 times. This shows that it is difficult for companies to bury funds and withdraw funds.
For real estate companies, the average inventory days in the first quarter of 2023 was as high as 5,662 days, and some companies were as high as 54,334 days. In other words, it took this company 149 years to sell out the entire shopping cart.
Faced with this situation, the Fourth Committee recommended that policies focus on supporting corporate cash flow through capital access, expansion and cost reduction. This helps companies generate short-term cash flow until at least the second half of 2023 or the first half of next year.
Merchants said that loan interest rates must be truly lowered to support them. Lending rates have now fallen but are still high compared with other countries; banks need to focus on a business’s ability to repay debt in the future to increase its access to credit, rather than just focusing on collateral. The Fourth Committee also recommended prioritizing low interest rates for exporters and small and medium-sized enterprises.
In order to overcome the difficulty in absorbing funds caused by weak internal resources of enterprises, the Fourth Bureau also believes that in addition to monetary policy, additional counter-cyclical fiscal policies are needed to stimulate aggregate demand. For example, we will promote public investment, focus on the development of large-scale infrastructure, and develop affordable housing. On the one hand, we will support enterprises in the construction, building materials, real estate and other industries, and on the other hand, we will meet the needs of enterprises in the construction industry. .The real needs of workers.
Measures to reduce and defer taxes and other costs were also mentioned, as now is the time to relax for people’s health.
For example, for real estate businesses, banks could consider allowing businesses that offer products in areas that meet basic savings needs to reschedule debt and retain debt groups.
The business community also hopes that there will be no regulations that create new fees and costs in the short term. Given that union fee income accounts for 2% of the wage fund, the Fourth Committee proposed changing the regulations to allow companies to retain the entire amount for at least the next two years.
In addition, in the long run, the Fourth Bureau proposes to focus on the development of modern capital markets to avoid over-reliance on credit for growth; continue to analyze and design corporate income tax policies suitable for various income scales and industries to ensure that the goals of increasing budget revenue and assisting corporate development are achieved.