Local firms call for looser credit policy

The Government should loosen credit policy or have support measures to help domestic enterprises survive in today’s difficult economic environment, company leaders said at a seminar in HCM City late last week.

Many participants at the workshop said the current credit-tightening policy had resulted in high interest rates, leaving companies more vulnerable to being taken over, and causing a slowdown in production and business activities.

For example, the Thinh Nam Bamboo and Rattan Product Export Joint-Stock Company could not get a loan from a bank after it had signed an export contract worth US$7-8 million.

“To have cash for export products, we have had to move heaven and earth and finally ask for ‘black credit’ service,” said Tran Xuan Mai, chairman of Thinh Nam Bamboo and Rattan Product Export Joint-Stock Company’s executive board and also chairman of the Nam Dinh Young Business Association.

“At present, we have had to pay a loan interest rate of 9 per cent per month (108 per cent per year),” he added.

A representative of the Kon Tum Young Business Association said the central bank’s credit tightening had created conditions for “black credit” activities to flourish in many provinces because local businesses had no other choices.

The credit tightening policy, particularly for those in non-production sectors, was affecting many production companies, including cement, steel, bricks and roofing tiles, and minor products including screws, wood, glass and even food, according to Vo Quoc Thang, chairman of the Viet Nam Young Business Association.

Thang also said there was a need for the central bank to reconsider credit tightening, and that many enterprises may not be able to survive if there were no changes in credit policies in the near future.

Many participants at the seminar also voiced their concerns about the central bank’s credit tightening policy.

Many profitable enterprises had been turned down by banks after requesting loans.

The result was that in the first half of the year, the banking industry’s credit growth was only 7 per cent, while the permitted level for the year was 20 per cent, Thang said.

Huynh Buu Son, an economic expert, doubted the ability of banks to shift loans from the non-production sector to companies in the production sector. Credit growth was seen only on paper, he said. In other words, the money might not be really injected into production enterprises.

Support measures

Son suggested that the Government develop support measures for companies that were involved in industries that needed to be developed.

He said the Government should allow enterprises to delay payment of value-added tax (VAT) without interest rates.

Enterprises could use this money to pay bank loan interest rates until they overcame difficulties, said Ho Minh Hoang, chairman of the Phu Yen Young Business Association.

Thang of the Viet Nam Young Business Association said that enterprises now benefiting from VAT-payment extension deadline included those having had many advantages to develop and make profits.

Meanwhile, many companies experiencing losses but still maintaining production to keep jobs, had not received support from the central bank, he said.

Phan Dinh Tue, chairman of the Dak Lak Young Business Association, said for banks with sufficient capital, the central bank should allow them to increase their credit limits so they could offer more loans.

The central bank should also keep a close watch over banks’ lending to ensure that capital sources were pumped into production and export areas, he added.

Participants also agreed that the Government should also focus on cutting public expenditures to curb inflation. – VNS

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial