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Experts eye credit loans for businesses

Update: July, 14/2012 - 08:45

HA NOI — Senior experts sat down together yesterday to discuss ways of handling low growth of credit loans, 0.76 per cent in the first half this year, caused mainly by large inventories due to the global economic crisis.

At an online dialogue yesterday afternoon between leading economists and readers of Viet Nam Economic Times, Cao Sy Kiem, former governor of the State Bank who is also chairman of the Viet Nam Association of Small and Medium-Sized Enterprises, said the central bank's decision to lower lending interest rates aimed to rescue businesses and help them overcome difficulties.

Le Duc Tho, deputy general director of VietinBank, said his bank had made it easier for businesses to access credit by offering more concerted measures for borrowers. The bank was willing to provide those in a sound financial position with competitive lending interest rates, and restructure existing loans for those who were experiencing difficulties.

Nguyen Tri Hieu, an independent finance expert, said banks were responsible for assisting businesses, and should be ready to support them no matter what their financial situation is.

Hieu said for instance, if a business fell into insolvency and bad debt, the bank needed to conduct suitable measures to assist the business while ensuring its own benefits. If the business was unable to recover and was on the verge of bankruptcy, it would have to liquidate its assets or face a court appearance.

The above-mentioned measures aimed to select suitable borrowers so as to maintain capital and benefit the banks.

Le Thanh Trung, deputy general director of HDBank, said: "To increase credit growth to 10 per cent in the remaining months this year, we need to stimulate demand for the entire market, especially in the retail and consumption sectors.

"As we all know, businesses in retail and consumption currently hold large inventories. We need a policy to stimulate consumption such as programmes related to education, healthcare, housing and other essentials."

For commodities where consumption needed to be stimulated, relevant bodies could consider slashing value added tax and looking at different capital channels.

If the above issues were handled in the correct manner, credit would grow, Trung said.

Sharing the idea, Le Duc Tho of VietinBank said the State Bank needed to restructure the national economy and implement suitable policies to boost aggregated demand on the domestic market.

The central bank was also asked to continue regulating policy on credit loans to adapt to changes in the market, while enhancing both corporate and risk management.

Tho said in the context of economic turmoil, businesses needed to make concerted efforts to raise production managerial skills and boost consumption, while mobilising all financial and human resources available.

On the same subject, Nguyen Tri Hieu said the State Bank had called on commercial banks to cut interest rates on existing loans from as high as 19 per cent down to 15 per cent starting from July 15 to ease financial difficulties for businesses.

However, Hieu noted that the central bank and relevant bodies needed to outline stronger measures.

In addition, the Government needed to enhance the performance of credit guarantee funds.

Many of these funds have been established across the country, but their charter capital tends to be low and they lack professional skills. As a result, these funds do not meet customers demand.

Uncertain outlook

Economic prospects were uncertain for the remainder of this year, and how interest rates progressed remained the greatest question for the nation's coming monetary policies, said senior economic expert Le Xuan Nghia at another meeting in Ha Noi yesterday.

Nghia said stable exchange rates, declining interest rates and improving foreign exchange reserves were good signs for the economy, but frozen credit flows had caused a "mortal disease" for it.

While economic development depended largely on investment, investment progress was slow, he said, anticipating only around VND18 trillion (US$865.38 million) worth of foreign direct investment (FDI) and VND20-22 trillion ($961.54 million-$1.06 billion) worth of public investment would be disbursed each month for the remainder of the year.

Lending hardly increased, he said, outlining three economic scenarios for the second half of the year:

If lending grew 1 per cent per month, this year's gross domestic product (GDP) would increase 5 per cent, accompanied by a monthly inflation rate of about 0.5 per cent.

If lending grew 1.5 per cent a month, GDP and inflation would hit 5.2 per cent and 1 per cent, respectively.

If lending grew 2 per cent a month, the correlative figures would be 5.5 per cent and 2 per cent.

Too great a credit increase to boost economic growth would fuel high inflation, Nghia warned, saying the second scenario would be the most suitable direction for the country.

He said there was a very low possibility that interest rates would be further reduced as banks still had to maintain significantly high rates to compensate for bad debt, although in theory, deposit rates for dong could be cut by 1 per cent more and lending rates by 3 per cent.

"The possibility of an interest rate adjustment will depend on how bad debt is dealt with," he said, noting that the State Bank of Viet Nam had already completed the first phase of restructuring the banking system by targeting fragile banks, and would now concentrate on dealing with bad debt.

He said the central bank was expected to announce more specific policies regarding this issue between now and the end of the year. "Enterprises should approach banks to restructure existing old loans as well as negotiate new borrowing, starting now."

Nghia said with positive signs in the global economy, especially improvement in the US, Japan and East Asia, the domestic economy was expected to rally in two to three quarters.

At yesterday's meeting, business representatives said they still faced difficulties related to matters such as taxes, loan access, input costs and legal frameworks, despite recent Government efforts to prop up enterprises.

Nguyen Duc Kien, vice chairman of the National Assembly's Economic Committee, said the Government had created every necessary condition and businesses should now build new strategies to survive.

They should pay most attention to restructuring markets, products and organisations, besides intensifying mutual association, he suggested.

Nghia urged firms to cut unnecessary spending, stressing that harmony within the community was now of great need to help Government policies take full effect. — VNS

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