Vietnam Economists Urge to Boost Credits for Firms

Vietnam should take prompt action to help enterprises gain easier access to bank loans as the consumer price index is forecast to be equal or lower than the 2010 target of 8%, economists said at a seminar last week.

 

Cao Sy Kiem, a member of the National Monetary Policy Advisory Council, said local enterprises remained hesitant in asking for bank loans for fear that the forecast double-digit inflation would cause interest rates to leap to 16% to 18% per year.

 

“Banks are also concerned that high interest rates will result in corporate borrowers defaulting on loans. So both banks and enterprises have been almost inactive this year,” Kiem told the seminar organized by Thoi Bao Kinh Te Vietnam newspaper.

 

Enterprises have taken almost no investment and production moves due to unpredictable macro-economic policy. “If inflation and lending rates are 10% and 16% respectively, enterprises must secure huge profits to cover their high production costs,” Kiem said.

 

Kiem underscored the need to give enterprises easy access to capital since inflation looks manageable.

 

However, he called for the Government to adopt a contingency plan to provide timely support for banks that lower their lending rates because the increasingly narrow gap between lending and deposit rates will give rise to all sorts of underground fees imposed on borrowers as seen in the recent past.

 

Le Tham Duong, dean of the finance-banking department of the HCM City Banking University, said credit loosening policy was necessary as credit growth was 10.52% in the first six months compared to the full-year target of 25%.

 

Duong said around 75% of the country’s 450,000 enterprises still find it impossible to take out bank loans and 40% of them have capital below VND1 billion. (STD)