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Banks unable to save insolvent businesses

Update: March, 29/2012 - 10:32

HA NOI — The number of small- and medium-sized businesses to dissolve and cease operation has increased rapidly due to economic difficulties.

The problem was discussed during a briefing of the Ministry of Planning and Investment (MPI) yesterday.

A State Bank of Viet Nam representative acknowledged the importance of businesses to the country's economic development and their link to the health of banks.

The bank could do little to help ailing businesses however.

Lam Nguyen Khoi, deputy director of the HCM City Department of Planning and Investment, told participants that in the Ciy alone, 931 enterprises had asked to stop operations, 529 of which already completed administrative procedures for dissolution, 23.8 per cent up over the same period last year.

In addition, some 5,012 firms sent in notices to cease operations to the HCM City Taxation Department, with 462 asking to have dealings suspended only temporarily, a 4.6-time increase.

It is reported that dissolved businesses are mostly involved in the trade, construction, tourism and transport sectors.

Deputy Director of the Ha Noi Department of Planning and Investment Nguyen Van Tu said the department had not yet compiled final statistics on the number of companies to be dissolved, but that the number asking to be dissolved would continue to increase.

It is reported that the number of newly established businesses reached 15,994 with total register capital of over VND91 trillion (US$4.3 billion) or a 7 per cent decrease in quantity and a 10 per cent decline in capital against the same period last year, Tu said.

The number of businesses dissolved rose by 6 per cent against the same period last year while the number of businesses having already completed administrative procedures increased by 57 per cent.

Bui Ha, an MPI official, said inflation and the marcoeconomy in March had remained unstable. With the interest rate still high, few businesses were able to borrow capital. Ha asked commercial banks to continue reducing their lending interest rates to create market confidence.

Deputy director of the Monetary Policy Department Do Thi Nhung said the bank acknowledged economic difficulties facing businesses.

Therefore, many policies related to interest rates and ceilings have been adjusted with a 1 per cent decrease. By the year end, for inflation to go down and bank liquidity to become better, the central bank would cut the deposit interest rate by 1 per cent every quarter this year while the target would be between 10-11 per cent, she said.

Regarding the suggestion to reschedule debt and offer new loans for businesses, she said the State Bank already issued new regulations on this issue and that commercial banks were permitted to do it.

However, Nhung attributed the difficulty in borrowing capital from banks to businesses themselves, adding that the number of ailing businesses asking to cease operations and stop paying taxes had rapidly increased and that banks should refuse lending to them.

She noted that the central bank and relevant agencies were trying their best to help address the country's economic difficulties. — VNS

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