Monday, December 10 2018

VietNamNews

Enterprises need a level playing field in financial support

Update: May, 25/2018 - 00:38

Hoàng Hải, deputy director general of the Ministry of Finance’s Debt Management and External Finance Department, speaks to Customs Online on the need to have a level playing field for Vietnamese enterprises when it comes to receiving loans.

What new things does the draft revising of the Government’s decree on provision and management guarantee compared to the present Decree?

One of the most noticeable points in the draft revision of the decree is the merging together of all contents relating to the guarantees of loans and bonds issued by the Việt Nam Development Bank (VDB) and the Việt Nam Bank for Social Policy (VBSP).

In other words, the Government’s policy on guarantee management is now all contained in one decree, instead of two as in the past. The decree will encompass normal guarantee management and the guarantee on the issuance of Government bonds, including by VDB and VBSP.

Under the new decree, the list for prioritised industries and occupations to receive the Government’s guarantee has been removed. A key factor for erasing such a guarantee condition is to protect the safety of public debt.

In the past there were three tiers of guarantee (70 per cent; 60 per cent and 50 per cent of the total investment), under the new decree there will only be two tiers: 70 per cent and 60 per cent.

In the past, all loans guaranteed by the Government were free of charge, as were the bonds issued by VDB and VBSP, whereas under the new draft decree, the borrowers have to pay a 0.2 per cent interest each year.

Do you think the policy will cause negative impacts on the cash flow of many enterprises and economic groups?

It is indisputable that in the past the issuance and management of Government bonds were rather simple. Any project having contributed to the country’s socio-economic development, or which was operated effectively, particularly in prioritised fields, would be likely to get the Government bonds. But, under the new policy, things will be different, the procedures will become stricter.

The new policy will help to avert risks for the Government’s reserved debt obligation (the Government’s debt guarantees). Việt Nam is now classed as a middle income country, and its credit coefficient has improved, as a result we are now playing in a level playing field with other nations.

The government will only give support to projects which are important to the nation, particularly in the field of national defence. This is in line with the 2017 Law on Public Debt Management.

Will you please talk a little bit about how the decree is structured to ensure it can be effectively implemented?

Government guarantee debts are an issue that has captured the special attention of the Government and the National Assembly, hence why the compiling of the decree requires so much attention, ranging from collecting and preparing documents to ensuring the financial capacity for a project which asks for the Government’s guarantee.

To make things easy, the draft decree will outline which documents enterprises will have to provide if they want to access government loans.

We hope the decree is completed and officially comes into life, as it means we’ll able to create a level playing field for all enterprises. The enterprises can then approach any bank or financial institution for loans, as it is in a free market economy. — VNS

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