Thien Thanh Group and the Vietnam Construction Bank (VNCB) recently organised the second conference on deployment of the VND50 trillion credit package programme in Hanoi. The point of this credit package for construction industry is that all stakeholders (investor - contractor - construction material supplier - bank) sign on one contract; and many commercial banks co-finance companies in the construction chain link.
So many hardships
The construction industry has been facing a lot of difficulties in recent years. With over 69,000 companies engaged in this industry, inventories in the construction sector remain huge. According to the Ministry of Construction, 16 million square metres of tiles, 12 million square metres of construction glass, 2.6 million tonnes of cement, 800,000 tonnes of steel are in stock. The inventory value of the construction industry has reached VND94.5 trillion, of which about VND17.5 trillion is in Hanoi and VND12 trillion is in Ho Chi Minh City. Remarkably, about 3,200 projects covering 81,500 ha are uncompleted, of which unfinished housing projects account for 29,500 ha.
In fact, the long-freezing real estate market has caused strong impacts on other related economic sectors and hurt building materials industries like steel, cement, ceramics and construction glass. The slump of this industry has left many workers unemployed, increased bad debts in the real estate sector and reduced real estate liquidity. Supply and demand was unbalanced, and actual homebuyers have troubly accessing housing products.
As the real estate market has a gigantic size, it causes a far-reaching impact on livelihoods of all walks of life and has direct relations with credit, construction, building material and labour markets. Thus, it directly impacts the economic growth rate.
Given difficulties of the economy in general and of the real estate market in particular, the Government issued Resolution 02/NQ-CP dated January 7, 2013 on a number of solutions to remove difficulties in production and business, support the market and handle bad debts. The resolution also includes solutions to clear difficulties and reduce inventories in the property sector. The State Bank of Vietnam (SBV) and the Ministry of Construction actively deployed VND30 trillion to fund the purchase of social housing and low-priced small commercial houses. The Government's policies have produced positive results but the market is still in a predicament on lack of mutual trust of stakeholders in construction chain link. This lack of trust has affected economic transactions like purchase and sale of construction materials, house purchase in instalments. Although bad debts in the real estate industry have reduced from late 2013, the value remains big.
Towards professionalism
This programme aims to realise and smoothly operate four-party chain link and build professional construction materials trading floors to ensure optimisation and efficiency for all stakeholders in the construction market, ensure safety for financing syndicates, and ensure the circulation of construction materials by using various forms of payments.
For feasible projects, the supply of building material in the chain is provided by organisers and construction material trading markets/floors. Borrowing producers do not necessarily have collateral assets and they only need to use construction materials supplied to projects as counterpart security. Borrowers are allowed to repay part by part. Banks will actively approach customers and indebted ones will have their loans rescheduled to be eligible for new loans.
In the chain link, VNCB aims to become a bank of sellers and join hands with other commercial banks to lend construction, building material and real estate companies.
Thien Thanh Group aims to become an organiser, which administers the construction of the first materials building - interior equipment trading floor in the country to connect investors and contractors - buyers of building materials - with building materials manufacturers. The construction material - interior equipment trading floor model will be a professional solution to boost sales and stimulate production and a basis for credit and other financial instruments to be used optimally.
In the VND50 trillion programme, VNCB plans to fund VND10 trillion of short-term credits for building materials in 2014. The lender accepts various forms of security. Buyers of construction materials can ask for deferred payment until the materials are shipped to projects.
With the closed four-party chain link, VNCB will also introduce credit products and services for home purchase, construction, home upgrading with a maturity of 15 years, settled in deferred payment.
At the meeting, VNCB signed an agreement to launch the programme with other banks in the financing syndicate, including MBBank, Ocean Bank, SCB, Nam A Bank, HD Bank and National Bank. VNCB and Thien Thanh Group also signed agreements with construction, material and real estate companies like Viglacera, Fico, Thai Nguyen Steel, Hoang Quan Real Estate, Dat Lanh, Central Construction Company 579, and Haiphong Real Estate Company.
Dr Le Xuan Nghia, former Vice Chairman of the National Financial Supervisory Commission (NFSC)
In my opinion, the four-party model is a financing and material supplying syndicate suitable for urban housing projects and new urban projects. This model will help deal with capital shortage of contractors to pay material suppliers and wages. This shortage has left investors, contractors and material suppliers indebted to banks - a reason for the high bad debt ratio.
Dr Nguyen Tri Hieu, Banking Expert
The VND50-trillion programme in support of construction and real estate is based on practical experience: The movement of goods (construction materials, inputs) and the movement of money (credit, investment money, deposit) to support the movement of goods. Although these two stages are separated, they are two sides of the same coin. These two stages were more distant in recent years and this caused crisis in construction and real estate sectors. Goods were backlogged and unsellable.
The programme has an appropriate mechanism to connect the two stages of goods and money/credit. It clears snags in the movement of goods and money and eventually controls cash flows.
Anh Son
Vietnamese
