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Low-interest agricultural loans are wise long-term investment

Update: July, 19/2012 - 08:57

Economist Bui Kien Thanh spoke to the publication Nong thon Ngay nay (Countryside Today) about the Government move to allocate US$961 million for preferential loans in the agricultural sector.

Is the move intended to help the agricultural sector out of its current difficulties? Some say the sector plays a major role in the national economy; others disagree. What do you think?

There is no detailed information about the move so far except the news that the Government plans to set up a loan fund of VND20 trillion (US$961 million) without interest rate for the agriculture sector.

In my opinion, the Government always treats the agricultural sector as important. Agriculture is the focus of attention at every Government meeting or meeting with economists because it is believed one of the nation's key advantages.

Agricultural exports are made 100 per cent in Viet Nam, unlike exports from other sectors, such as garments and textiles, where key inputs are often made overseas.

The agriculture sector ensures that Viet Nam always has enough food to feed its people, even if the economy is in difficulties. It plays an important role in the national economy. It provides jobs and lifestyles for farmers so they do not have to go to cities to earn living.

What should we do to keep the loans on the right track and avoid wasteful investments?

We have to see who will seek access to the preferential loans. Recently, Prime Minister Nguyen Tan Dung approved the setting up of a credit source to store 500,000 tonnes of rice.

However, only Viet Nam Northern Food Corporation (Vinafood 1) and Viet Nam Southern Food Corporation (Vinafood 2) are allowed to borrow the money. There is no mention of private companies being allowed to borrow.

We do not know what commercial banks the Government and the State Bank of Viet Nam have assigned to control the preferential loans. I think it is unlikely that all 49 commercial banks will be invited to join.

To keep the loans on the right track, it will be necessary to issue clear and detailed policy of preferential interest. The Ministry of Planning and Investment and the Ministry of Agriculture and Rural Development have been advised to co-operate with each other to announce operational plans in detail instead of passing on vague information.

What are the specific fields in the agriculture sector that need investments to function more effectively?

The Government has listed the key fields as the processing of farm produce, rice cultivation and processing aqua products. As far as I know, dozens of processing and aqua product companies have faced difficulties due to a shortage of capital.

Apart from this, catfish breeders and rice growers also need financial support at critical times.

Companies lack capital because commercial banks have loaned little since the beginning of this year. So how do we do to get investment capital to the companies?

We have a regulation that if companies cannot pay their debts to commercial banks, they are not allowed to continue borrowing money from them. The regulation has actually caused trouble for both companies and commercial banks for the past six months. This leads to two things – companies lack capital but can't borrow from commercial banks that have available capital.

In a recent attempt to improve the situation, the State Bank of Viet Nam ordered commercial banks to lower their interest rates to 15 per cent for all contracts already signed with companies, including agricultural companies.

In other words, the Government as well as the State Bank of Viet Nam should issue new regulations creating more favourable conditions for companies to access investment capital. — VNS

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