High interest rates impede enterprises’ expansion plans

High interest rates are shying investors away from banks as most said in a review meeting in HCM City on Wednesday they could not stand the high capital cost of up to 18-19 percent a year.

“An interest rate of as high as 18-19 percent is considered the biggest challenge to local businesses this year,” Pham Ngoc Hung, vice chair of the HCM City Union of Business Associations, told the Daily on the sideline of the union’s meeting.

“Local enterprises dare not take out loans from banks as the interest rate is preventively high. Therefore, they dare not look for upgrading technologies in manufacturing due to the high capital cost, and just take out short-term loans to deal with some instant problems,” said Hung.

Tran Buu Long, deputy director of the HCM City Credit Guarantee Fund for Small and Medium Enterprises, said the government would sort things out this year in an effort to bring down the interest rate, but the job would not be easy. There are forecasts that the lending rate will remain high in 2011, and therefore, many local enterprises won’t take out long-term loans for investment, but just small sums for short-term deals.

“Some enterprises have good ideas to develop their businesses but they don’t have money to carry out them,” Long added.

Besides high interest rates, small and medium enterprises also face difficulties related to mortgage assets.

Some enterprises at the meeting also said that they are shocked when interest rates were chased up to a quite high level of 18-19 percent annually. And, they are waiting for good news from the government for an effective policy to bring down the interest rates. – Saigon Times

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates

Posted by VBN on Jan 23 2011. Filed under Banking-Finance, Enterprises. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry