High interest rates exaggerate enterprises’ burdens

December 17, 2010 | 08:57

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High lending rates have cast big impacts on Vietnamese enterprises’ export contract negotiations.

Phuoc Long Textile’s Business Department head Bui Thi Kim Phuong said local businesses had found it hard to negotiate with foreign partners in price terms to seize export contracts.

“Foreign partners are very careful in price negotiations. Formerly, we used lending rates of around 12-13 per cent per year when negotiating export contracts. With current [lending] rates, we cannot win the export contracts,” Phuong said.

Deputy chairman of the Ho Chi Minh City HandicraftandWood Industry Association(HAWA) Tran Quoc Manh said businesses would face stagnant production if current high lending rates continued.

“At a time when lending rates are soaring, businesses are in high gear for completion of year-end export orders, driving them into a financial distress and adversely affecting production,” Manh said.

In this situation, Manh said that some export companies had decided to source US dollar loans with lending rates of around 7 per cent, per year, but it was not easy to access to US dollar loans.

General director of Vinh Thong Footwear Company Nguyen Quoc Tuan said his company had accessed to US dollar loans after seeing the lending rates on dong loans surging above 14 per cent, per year.

Tuan, however, said businesses would prefer dong to dollar loans if the government took measures to drive the lending rates down to reasonable levels because they still used local currency to buy domestic materials.

Current lending rates fluctuate between 20.5-21.5 per cent for dong loans and around 8-9 per cent for US dollar loans. However, sourcing dollar loans may be risky in the long term with exchange rate adjustments, he said.

By Thanh Vu

vir.com.vn

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