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0% lending interest rate not attractive enough?
Only three businesses have borrowed money from the Vietnam Development Bank (VDB) to pay salaries, social insurance and unemployment benefits to labourers in the three months since the Government launched the lending programme.
At the end of February 2009, the Government promulgated Decision No 30, launching the lending programme, under which businesses facing difficulties due to the economic downturn can borrow money to pay salaries, social insurance and unemployment benefits to labourers.
Businesses are eligible if they have cut their labour forces by 30 percent (or laid off 100 labourers, not including casual labourers with no longer than three-month labour contracts), and still do not have money to cover the above expenses.
Despite the 0% interest rate, businesses prove to be indifferent. The Ministry of Finance (MOF) on June 4 announced at the regular Government’s meeting that by May 15, only three businesses had taken out loans, borrowing 2.34 billion dong to pay 450 laid-off workers.
Explaining the modest number of borrowers under the programme, MOF said that the disbursement has been slow as the programme has just been kicked off. Moreover, some enterprises which were in the process of following formalities to borrow money suddenly got contracts to sell products.
Indeed, the slow disbursement of capital under the programme was brought up earlier. VDB’s General Director Nguyen Quang Dung said at a workshop in mid April that only one case had been settled by that time. Dung said that businesses do not have problems with the procedures at VDB, they mainly have trouble getting certificates from the Ministry of Finance and local departments of Labour, War Invalids and Social Affairs that they meet conditions to be eligible for the loans.
In some cases, according to Dung, enterprises really have difficulties but do not want to borrow money for fear that their prestige would be negatively affected.
Representative from the Vietnam Textile and Apparel Association (Vinatas) has confirmed that some of its members are hesitating to borrow capital to pay labourers for this reason.
“Though they are really in difficulties, they still hesitate to borrow money. Though the interest rate is 0 percent, they still have to pay principal. How would they get money to pay to pay debts if they continued suffering losses?” the official said.
An enterprise in Da Nang in early April took necessary steps to borrow 1 billion dong. However, the local labour department refused to grant a certificate on meeting the requirements to be eligible for loans because the list of laid-off workers included ones who lost their jobs in 2008 as well. Meanwhile, under Decision 30, enterprises are not allowed to use these preferential loans to pay workers who lost their jobs last year.
According to ministry statistics released in late February, 80,000 labourers had lost their jobs since the beginning of the year. It is expected that the figure will rise to at least 200-250,000 by the end of the year; in the worst-case scenario, 400,000 labourers may fall into unemployment.
VietNamNet, VNEconomy
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