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Slowdown in production creates challenges for local businesses

Update: June, 17/2014 - 09:20

The Government and State Bank are vital in helping enterprises overcome challenges, Nguyen Van Giau, Head of the National Assembly Committee for Economic Affairs told the Viet Nam Economic Times.

What do you think of credit growth in the first five months of this year?

At the ongoing seventh session of the National Assembly, all deputies expressed dissatisfaction about it. They agreed that one of the key factors causing the problem was the weak capital-absorption capacity of the national economy. Quite a few deputies said this was due to strict borrowing conditions by banks. Enterprises, on the other hand, said they didn't want to borrow money to expand due to the stagnant economy.

In my opinion, the list of enterprises that have either temporarily stopped production or closed down continues to increase, while newly set up enterprises don't have the capacity to access credit. However, to find out what the main causes of the problem are, we need to conduct surveys of enterprises and employees' associations.

Before the convening of the seventh session of the National Assembly, we conducted several provincial fact finding missions to understand the real situation faced by enterprises. Through the results, we came to the conclusion that the root cause of slow credit growth was limited production. Challenges and difficulties have limited enterprises' production capacity and weakened their comparative strength. So, I think it is imperative to come up with measures to help them.

To help enterprises, the Government has asked the banks to reduce interest rates. Do you think the measure will work?

I think it would help a lot, as by May, the consumer price index (CPI) increased only 1.08 per cent. In many countries, business operations are rather transparent. Besides borrowing money from banks, enterprises mobilise money from the capital market by issuing bonds or shares. But for us, the flow of basic capital goes to the banks. That means, enterprises play two roles at the same time - borrowers and depositors.

Meanwhile, ordinary citizens consider depositing money in banks as an investment channel. That's why they always expect the interest rate to be higher than the inflation rate. When the macro economy is stabilised and inflation capped, the Government should think about lowering the interest rate.

Some people suggest the Government introduce an economic stimulus package like in 2009. What do you think?

I don't agree. It is very simple. Our macro economy is not yet stabilised. Last year, we set 5.5 per cent as the rate for economic growth rate. But finally, we achieved only 5.42 per cent. This year, we set the GDP target at 5.8 per cent. If things go smoothly, it is feasible that we will achieve it.

For enterprises, I think we should focus on measures to help them overcome their difficulties. This is one way to ensure that the GDP growth rate of 5.5 per cent this year will be achieved.

What measures do you suggest?

I remember in 2009, the Prime Minister asked all cabinet members to go to provinces and meet enterprises and listen to their problems. After those visits, we had to report to the PM. And the economic stimulant package was introduced - and it had an immense effect.

At present, to help enterprises overcome their challenges, the State Bank of Viet Nam and commercial banks have come up with several feasible measures. One example is the credit programme linking banks with enterprises in HCM City. It has worked so well that I think it should be replicated in other localities. — VNS

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