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Gov’t backing for company borrowings to partially help: Business
The Government’s move to rescue export and trading enterprises through loan interest support has attracted a positive response but according to some business executives, this will help to solve part of the problem.
Businesses eligible for the Government’s economic stimulus package worth VND17 trillion (about US$1 billion), effective from February to December, can take out bank loans at interest rates that are four percentage points lower than normal rates.
Lifeline for cash-strapped businesses
This is good news for large numbers of producers who are wrestling with the lack of funds due to high borrowing costs and worsening business conditions.
Nghia Nipper Co. Ltd. is lacking capital to fulfill big orders, said Do Hoa, general director of the HCMC-based company. He added his firm would certainly apply for cheaper loans under the Government scheme.
But the company’s needs for capital are not as huge as before because, he said, orders from customers have plunged 30% since early this year due to the economic slump, locally and globally.
Hoa hailed the Government’s loan interest support, saying it would help his company and others offset lost revenue from reduced selling prices.
Silk producer Toan Thinh late last year had to take out a bank loan of VND3 billion to finance its operations and the interest rate for this loan was high. Thus, Ho Viet Ly, general director of the company, said he would repay the loan and seek new loans with interest rates partly subsidized by the Government.
This subsidy will allow the company to cut costs to ensure the efficiency of its operations, he said.
Saigon 3 Garment is also considering borrowing from banks in line with the stimulus scheme given capital shortages, said Pham Xuan Hong, general director of the firm.
Hong, who is also vice chairman of the Vietnam Textile and Apparel Association, said other companies in the industry were also in dire need of funds since they had spent heavily on payrolls and bonuses for workers ahead of the Lunar New Year holiday, or Tet.
Concerns about outlets
Financial support is not the only answer to the problem. How to find buyers at a time when people at home and abroad are spending less will prove to be tough for companies.
Binh Duong Province-based wood processor Minh Phuong reopened to business on Monday, eight days after Tet, but its factory has since stayed idle due to the lack of orders from customers.
The company has temporarily laid off its workers pending new orders, director Huynh Van Hanh said.
Commenting on the Government stimulus package, he said, “If the Government and the State Bank of Vietnam make this a reality, it will be good.” However, having stable orders or outlets will be equally important, he added, adding his company had been hit by a 30-40% decline in orders compared to the year-ago period.
Hanh, who is also vice chairman of the Handicraft and Wood Industry Association of HCMC, noted other companies in the wood processing industry were lacking orders as well but said association members would meet to discuss how to make use of the Government support.
The shortage of orders has also delivered a blow to Maika Co. Ltd. Director Han Phuc Sinh said his company had yet to resume production, but would ask for bank loans under the Government scheme to partly solve its financial woes.
Normally, Maika borrows from banks twice a year, with each loan totaling several billion dong, Sinh said, adding that last year the firm used VND500-600 million to service loans, so if it got Government backing, the amount of the interest would fall by around half.
“This is affordable but the problem is how to find good outlets for goods,” he said.
Under the Government scheme, the maximum period of a subsidized loan is eight months, so Hoang Kim Co. Ltd. based in HCMC has asked how the takers of subsidized loans could manage after the subsidy expires.
Hoang Kim director Luu Van Thanh said that for his company, it would take three to five months to complete an order and this meant his business could fulfill two orders within eight months.
The loan interest support can help Hoang Kim cut prices to make its products competitive. According to Thanh, the low prices can only stay in place until the support has been over.
But he implied that half a loaf was better than no bread. He will go to a bank today asking how to apply for Government-subsidized loans since he needs working capital to buy raw leather materials and fabrics to produce handbags and suitcases for export.
VietNamNet, SGT
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