Enterprises in Vietnam calling for banks’ support

Enterprises in Vietnam are facing two difficulties including forex rate and interest rate, they said in a meeting with HCM City People’s Committee on Feb 16, so they have proposed the governance to call for banks’ support in production field.

According to participants, all firms (including exporters) are suffering big headache as forex rate is increasing because 60-80% of production materials of wood and apparel sectors must be imported.

With recent forex rate fluctuations, enterprises are likely to adjust production prices up by 10%, which will reduce the competitive strength of domestic companies. HCM City-based businesses also stressed they had to buy US dollar at higher than banks’ listed forex rate.

Pham Ngoc Hung, Vice head of HCM City Enterprises Association proposed the city’s People’s Committee to support enterprises to join its price stabilization program and call for commercial banks to provide preferential lending for labour-intensive consumer producers.

Regarding foreign currency, enterprises also complained no bank dared to committee US dollar sales according to listed rates if they need capital, so they had to keep US dollar on bank accounts.

On Feb 16 afternoon, US dollar on the free market rose to 21,900 dong, 5% higher than banks’ listed level, and enterprises are forced to pay fees to buy the US dollar from banks.

Attending the meeting, Tran Hoang Ngan—member of National Monetary and Financial Advisory Council spoke that the council recommended the SBV on interest rates. Accordingly, HCM City expects to propose a list of industries and enterprises in need of capital support and the Central will inject cheap-cost capital and appoint state lenders to provide loans to the licensed firms. With this, the lending rate for production industries is expected to decrease.

Ngan said, it is not impossible to bring down interest rates of the dong immediately because the country is in the inflation combat. Cutting down US dollar interest rates means reducing the attractiveness of domestic currency and residents will race to shift to keep assets in foreign currencies. “In the coming time, the No 1 priority is to narrow trade deficit and budget gap, the economy is expected to go down but we have to accept the reality for the goal of macroeconomic stabilization”, he added.

He said the council is drafting a project to curb dollarisation. The project includes the definition of foreign currency speculation, and measures to deal with the situation.

On Feb 17, the government will meet the Central Bank and Finance Ministry to seek wayout for forex rate and interest rate issues. – Vietbiz24

Tags: Vietnam companies, Vietnam enterprises