Getting back in business a curly question

High interest rates and difficulties in accessing loans continued to be the central problems voiced by firms at a recent meeting between State Bank of Vietnam (SBV) executives, Hanoi and Ho Chi Minh City management authorities and corporate community representatives.

State-owned Hapro director Vu Thanh Son said Hapro now borrowed at 11-14 per cent, per year lending rates, but it had proven hard for its member companies with low chartered capital amounts to grab bank loans.

“Banks fear lending, credit section staff fear incurring responsibilities when appraising firms’ loaning applications whereas firms fear borrowing. If this bottleneck was not shortly addressed, both sides will see their businesses go down,” said Son.

Amid firms’ difficult time, SBV chief Nguyen Van Binh acknowledged the current lending rate in Vietnam was high compared to other countries when the rate is 5 to 9 per cent only, but reducing the rate must be fine-tuned with macroeconomic conditions.

The SBV forecast the country’s inflation would be retained at below 7 per cent this year, helping the central bank to remain consistent with its target of further softening the lending rate.

However, the rate could be eased at most 2 to 3 per cent maximum within this year. Accordingly, within the next three months lending to businesses would slide to 9-10 per cent, per year and old loan rates reduced to 13 per cent, per year, according to Binh.

Banks argued the interest rate has fallen to 10-11 per cent, per year even before the SBV took a step to bring the ceiling mobilising rate to 7.5 per cent, per year from March 26, but banks found hard to boost lending as they could not find ‘good’ customers.

Eximbank chairman Le Hung Dung said creating output market to boost firms’ consumption would be of equal importance than abating the lending rate.

In reality, most of firms who voiced complaints about difficulties in accessing loans were those who have either bogged down in debts or did not have any more mortgaged assets to take new loans.

However, the SBV confirmed it shall not lower lending requirements to increase firms’ access to loans. However, to help firms disentangle in current context, the SBV is reportedly considering extending the time for enforcement of Circular 02 on bad debt classification as well as the time firms with dollar raising sources could borrow dollar loans from banks.

SBV chief Nguyen Van Binh, however, assumed that at this time monetary policies alone could hardly rescue firms. ”The fiscal policies should join in. The corporate income tax should be relaxed to 15 per cent, or at least to 20 per cent, or the value added tax reduced to 5 per cent. Lower tax and fees could fuel consumption, from there reviving production,” said Binh.