Dong Nai businesses moan woes from credit tightening

High interest rates, inflation, problems buying dollars and reduced access to bank loans were high on the agenda of a seminar in the southern province of Dong Nai late last week.

The seminar attended by about 500 enterprises in the province attracted potential solutions from economists and businesses.

Phan Van Binh, director of Nhat Nam Company operating in wood manufacturing and mechanical products and services, said that 90% of his company’s turnover came from manufacturing, but all the money from services had to go back into staff and costs. He said most Dong Nai businesses didn’t have enough capital to run.

The high interest rates deterred enterprises from borrowing, he said. “Enterprises will not invest in new equipment and technology to make manufacturing capacity and quality more competitive,” he said, adding, “If the high interest rates continue, companies will go under.”

He suggested the Government should issue similar policies to 2009 with interest rate support and extended tax deadlines.

At the seminar, Nguyen Chi Cong, director of Cong Tri Co., Ltd, which breeds pigs in the province, said with the current high interest rates, his company was forced to rationalize business and cut staff. The company has 2,000 pigs from more than 10,000 pigs two years ago, because of low pork prices and increasing input costs and interest rates.

Cong complained that enterprises in the breeding sector were subject to price stabilization prices programs but didn’t get interest rate support from banks. “We are paying the same interest rates as industrial manufacturing enterprises, while price stabilization programs force us to keep prices down,” Cong said.

He said, Vietnam is an agricultural country where labor-intensive wet-rice is grown, but 90% of livestock feed needs to be imported putting breeders at the mercy of the sharp increase in dollar value, bank interest and inflation.

“Now we must pay interest of 1.6% to 1.8% per month, while two years ago, it was only 0.8% per month,” he said, adding, “Many enterprises in the sector are selling their farms to pay the high interest.”

Cong suggested the government and banks should work together to bring the rate down to 0.8% per month.

On top of steep interest rates enterprises said it was very hard to get loans. To get a loan, Pham Duc Binh, chairman and general director of Thanh Binh Corporation said that some banks demand enterprises to be transparent and then charge hidden fees that don’t go on the accounts.

Binh said the central bank needs to control the items of the lending interest of commercial banks. For example he said steel prices are increasing, but some commercial banks gave steel trading companies loans to hoard steel to bump up the price more.

Many small and medium enterprises (SMEs) complained they can’t buy dollars from banks even though they were entitled to access to foreign currencies to do business overseas.

The central bank regulations state if you present documents showing you are going abroad for travel, education, medical treatment, and other legitimate reasons you can buy dollars, but they said that wasn’t the case at Dong Nai’s banks.

In discussions about the central bank’s credit tightening for property transactions, some enterprises complained that with the oversupplied market and inflated prices it is unnecessary for banks to pour money into the sector.

Tran Minh Tuan, deputy governor of the State Bank of Vietnam, said interest rates would drop when inflation falls. The support provided by the Government in 2009 was only possible because of different economic conditions, he said, adding it wasn’t possible now.

He said credit tightening for property transactions was needed to provide the capital to manufacturing sectors.

Posted by VBN on Mar 24 2011. Filed under Enterprises. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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