Firms bemoan inflation, monetary policies

Economic groups, corporations and big companies voiced their concerns over severely tightened monetary policies at a forum in Ha Noi last week.

The forum evaluated inflation’s impact and Government Resolution 11, which aimed to curb inflation. The Bank for Investment and Development of Viet Nam (BIDV) organised and conducted the meeting.

Contributors revealed that in the first half of this year, about 39,500 new enterprises were established with a total registered capital of VND230.2 trillion (US$11 billion). These figures show a decline of 4.7 per cent and 12.8 per cent in number and registered capital value respectively.

In the same period, around 30 per cent of businesses were forced to halt, go bankrupt, dissolve or close down their operations.

A BIDV-conducted survey on 70 enterprises, including economic groups, corporations, large State-owned enterprises and private companies which are the bank’s traditional customers, showed that most enterprises were hit hard by the central bank’s “too tightened monetary policies,” while 16.6 per cent were severely influenced. In reality, BIDV had to extend principals and interests for those businesses.

Only 13.3 per cent of the total businesses are unlikely to be affected, according to the survey.

Due to unclassified criteria relating to essential and nonessential real estate loans, most commercial banks have restricted their lending to non-production and real estate sectors. As a result, many essential real estate projects, such as housing for low-income families or infrastructure development for industrial parks are unable to access loans.

A reduction of VND80.55 trillion ($3.87 billion) in public investment projects this year, increased production costs and tighter monetary policies were to blame for the harsh situation.

In the past few months, banks posted their lending interest rates up to 22 per cent per year.

Most participants bemoaned the continued increase in production costs due to high interest rates. The total expenses per total revenue ratio increased significantly from the same period last year. Specifically, expenses on loan interest payment soared to 30 per cent from 20 per cent.

Consequently, the financial condition of enterprises’ operations in electricity, cement, steel, real estate and transportation fields are getting worse.

Representatives said that relevant bodies should review and report on the impact of Government Resolution 11, with a focus on how tightened monetary policies influence business operations.

Do Hong Khanh, chairman of the board of directors of Bach Dang Joint Stock Company, said that enterprises should cut costs by switching to night shifts to take advantages of cheaper electricity prices while minimising stockpiles of products to avoid warehouse expenses.

They also should look for financial sources from other channels, he said, adding that if capital was unavailable, businesses should temporarily halt their production expansion. — VNS

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam monetary policy