2010 is also expected to be a difficult year for IT firms, since the dong has been devaluated sharply, while the electricity and petrol price have increased at the same time.

 Small companies will have to go through many hardships

 Experts have pointed out that small and medium companies with weak resistance will be the ones who suffer most, because they find it difficult to access loans, maintain stable operation and retain labourers.

Tran Anh Tuan, Deputy Director of ATHL Solutions, which specializes in providing telecom and technology solutions, a partner of Siemens, said that enterprises will reconsider the budget for IT in 2011 and they may cut down the expenses, because making investment in IT would not be the top priority thing in the context of the increasing production costs.

 Also according to Tuan, the enterprises which carry out IT projects like ATHL are facing big difficulties when the dong/dollar exchange rate fluctuates.

 “The profits from the projects carried out since late 2010 would be decreasing, he said. “It is because the prices of technologies and equipments were fixed in late 2010, when the exchange rate was still low. As the dollar price has increased, the prices of import equipments have also increased, thus making the total costs of projects increase”.

 According to Tuan, many other companies have fallen into the dilemma like ATHL. If companies break contracts, they may face lawsuits to be raised by partners. Meanwhile, if they import expensive equipments to fulfill the contracts, they will incur losses. Tuan said that his company’s choice is that it will have to fulfill the contracts in order to retain clients.

 Another big problem for enterprises is that the lending interest rate is overly high at 20 percent per annum, which makes enterprises hesitate to borrow money to carry out business expansion projects. “We dare not borrow money from banks if the interest rate is still high at 20 percent, because we are not sure that we can make the profit of over 20 percent to pay interest rates,” Tuan said. “If we need capital, we will seek capital from shareholders and non-bank sources which offer capital at preferential interest rates”.

 In principle, when the dollar price increases, people always think that software export companies will get benefit. However, Le Nguyen Hong Phuong, Director of BIT Group, which specializes in doing the software outsourcing for Australian market, said that the benefits from the exchange rate adjustment are not big enough to offset the increases of the electricity, price prices and other expenses.

 According to Phuong, the company will have to purchase new equipments this year, including computers and server. The dollar price increase has pushed the prices of the equipments increase sharply. Besides, the company will also have to apply new wage policies to its staff, when everything is getting more expensive.

 Difficulties will be existing for a short time

 In the current conditions, a small enterprise with 20 workers established in 2005 like Phuong’s has anticipated a lot of difficulties. Phuong said that the thing that his company needs to do now is to try to exist on the market by cutting down expenses, maintain the current apparatus and ensure the quality of products.

 Phuong admitted that as there are many macroeconomic changes, it is difficult for small and medium enterprises to draw up long term business strategies. “Therefore, companies need to apply flexible business plans and cut down unnecessary expenses,” Phuong said.

 However, he believes that difficulties will exist for a short time. Companies need to focus on controlling receipts and expenses well in order to ensure profit, rather than trying to expand business.

 Source: Vietnamnet