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HCM City comes to the rescue

Update: June, 07/2012 - 10:26

 

Employees of HCM City-based wood processor Savimex at work. As enterprises in the city are still hungry for capital, the city plans to lend them up to US$1.44 billion. — VNA/VNS Photo Van Khanh
HCM CITY — The demand for funds among HCM City companies remains massive despite recent efforts by the Government to reduce bank lending interest rates, and HCM City plans to step into the breach and provide loans to them.

Following a meeting on Tuesday between the State Bank of Viet Nam's city office and the People's Committee to consider the problem, especially for manufacturing companies, Mayor Le Hoang Quan asked business groupings to report about the amount required by June 10.

The city is expected to lend around VND30 trillion ($1.44 billion) in June.

"The People's Committee will work with the SBV," he said, without revealing details of the proposed lending mechanism.

Nguyen Ngoc Thang, deputy director of the central bank's city branch, was quoted as saying by Nguoi Lao Dong (The Labourer) newspaper: "Most enterprises have overdue or bad loans but do not have effective business plans. That is why they can't borrow more."

He revealed that since May 4, though interest rates were reduced to 14 per cent per year for some key sectors like agriculture, small and medium-size enterprises, and support industries, only VND7 trillion ($336 million) was borrowed by 420 enterprises.

"The figure is small, only 1 per cent of the city's total credit," he added.

Meanwhile, banks do not know what to do with their funds.

"We used VND10 trillion ($480.7 million) to buy the government bonds at 4 per cent interest per year," Truong Van Phuoc, general director of the Viet Nam Export-Import Commercial Joint Stock Bank (Eximbank), said.

"We prefer to offer companies loans at 13-14 per cent per year rather than buy government bonds at 4 per cent," he added.

Phuoc approved the SBV's idea to set up a company to buy bad loans worth VND100 trillion from banks.

SBV deputy governor Tran Minh Tuan said many banks did not want to lend even at 14 per cent and "the situation must stop," he said, referring to the burgeoning bad debts at banks. — VNS

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