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Rubber firms face mounting hardships

Rubber firms are facing mounting hardships driven by a lack of orders, high borrowing costs, and large tax refunds having yet to be paid to them.

Rubber firms face mounting hardships

Rubber firms are facing mounting hardships driven by a lack of orders, high borrowing costs, and large tax refunds having yet to be paid to them.

Huynh Van Bao, deputy chairman of Vietnam Rubber Association, has noted that rubber production and trading units are encountering difficulties on all sides. Amid global headwinds the demand for rubber has sunk, leading to a supply and demand imbalance.

This has caused both the rubber price and order intake to diminish, creating market pressures as most Vietnamese rubber is bound for export, while domestic consumption just accounts for 15 per cent of the total production output.

“The global rubber output exceeds 14 million tonnes per year, and demand is nearly the same. However, the demand for production and consumption is sinking due to inflation, rising interest rate and the impact of armed conflicts,” said Bao.

This has also entailed difficulties associated with human resources working at businesses producing items from rubber latex.

Sinking finance has been preventing firms from offering their labourers better wages. Such workers earn around $230 per month on average versus tough working conditions, leaving many labourers to quit their jobs and shift to other works.

The biggest difficulty to rubber firms at present is depleting capital sources, putting businesses in a ‘dilemma’.

In addition, many natural rubber export firms report having yet to receive tax refunds despite having sent many proposals.

The VAT tax refund of these firms is approximately $10.8 million.

Hoa Thuan Trading Co., Ltd. is one of Vietnam’s leading natural rubber producers and exporters.

The company, however, has recently cut jobs and temporarily ceased production.

According to director Dinh Thi Thanh Tam, for a couple of months now, the company’s order intake has decreased gradually, and they have had to temporarily halt production.

In 2022, Hoa Thuan saw its revenue take a 94 per cent dip, and it has yet to receive its $2.1 million tax refund, leaving the company in ‘dire straits’.

Meanwhile, the company still incurred diverse expenses, such as corporate income tax, bank interest, and payment for workers.

“We continue paying tax. The regulated fine for late tax payment is 0.3 per cent. Bank interest is high. Payment for the labourers cannot be late as they need to cover daily expenses. Without working capital, the company has to halt operation, causing a big impact on our workers,” said Tam.

Hoa Thuan has sent dispatches asking for help to diverse management agencies, yet a reasonable response or supportive policies to help the firm have not been forthcoming.

Similarly, Tan Quang Huy, managing director at Huy Brothers Co., Ltd. said, “Rubber is a raw material, so despite order shortfalls, businesses might maintain operations waiting for the market to move. However, not having the tax refund, means businesses are struggling for oxygen and can hardly sustain operations."

“Our company runs its business effectively so that we can fulfill tax obligations and create jobs for our workers. We then expect relevant management agencies to soon tackle unsolved matters, helping firms to shortly come back to normal operation."

Apart from Hoa Thuan and Huy Brothers, many other rubber firms have temporarily halted operation due to failure to sustain pressure from high interest rates and unpaid tax refunds, such as Huynh Hai Nam Import and Export Trading JSC, Viet Phu Thinh Rubber JSC, and Nam Phat Rubber Mechanical Co., Ltd.

Read more at Vir

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