Starved for cash

Workers of the Vikyno & Vinappro Co in the southern city of Bien Hoa produce agricultural equipment. Many enterprises are thirsty for operating capital. — VNA/VNS Photo The Anh

HA NOI (VNS)— Enterprises remain thirsty for operating capital, with access to credit remaining difficult despite official measures to cap interest rates and provide incentives to lenders.

At a Ministry of Industry and Trade meeting on Monday, enterprises and trade associations urged the Government to provide further support to enterprises struggling with a shortage of cash and high inventories. September also saw little reduction in the inventories despite efforts by the Government and enterprises.

Moreover, Government support in terms of interest rate and tax relief has not been sufficient to stimulate lending or consumer demand, said Tran Du Lich, a member of the National Assembly Economic Committee.

Access to credit remained difficult for enterprises even though the Government has asked commercial banks to lower loan interest rates to below 15 per cent and provide interest support to small- and medium-sized enterprises. Central Institute of Economic Management deputy director Nguyen Dinh Cung also said that support measures had failed to address the underlying causes of the difficulties and that an "overdose" of stimulus might reignite inflation and economic instability.

Small- and Medium-Sized Enterprises Association vice president To Hoai Nam noted that credit grew across the entire banking industry in September by a mere 1.8 per cent and that the pace for the year remained far below the target of 8-10 per cent.

Low credit growth rates demonstrate that bank capital has not reached enterprises, said National Financial Supervision Committee chairman Vu Viet Ngoan.

"Enterprises are still mired in difficulties," Ngoan said.

It was a paradox that banks had money, while enterprises thirsted for capital but could not access it, said Doan Trong Ly, the director of a livestock company.

Yet high lending interest rates have been the cause of rising bad debts and increasingly tense relationships between enterprises and banks, commented the president of Lang Son Province's Small Business Association, Lai Van Toan.

More support was needed to help enterprises overcome hard times, even though about 6,100 enterprises have reported being able to restore full production since the tax relief package was implemented, said Deputy Minister of Finance Do Hoang Anh Tuan.

A tax support package worth roughly VND29 trillion (US$1.38 billion) was approved in May, extending or reducing land use fees, corporate income taxes and value-added taxes (VAT).

The Ministry of Finance has proposed that the Government provide another three-month deferral of VAT payments for small and labour-intensive enterprises, allowing VND3.75 trillion ($178.3 million) in VAT payments due in June to be extended to April of next year. The ministry was also proposing to offer a 50-per-cent reduction on 2013 land use fees.

Enterprises were also calling for the VAT rate to be reduced from 10 per cent to 5 per cent on certain products such as chemicals, footwear, fertilisers and garments.

Viet Nam Banking Association general secretary Tran Thi Hong Hanh said that commercial banks would continue to support enterprises with loan policies and join hands with enterprises to tackle their difficulties.

However, Hanh said, enterprises should be active in reorganising production to ensure consistency with their financial capacity while making their financial situations more transparent in order to facilitate banks in evaluating credit worthiness. — VNS