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Subsidy causes swing to dong loans
Their interest rates are nearly 50 per cent higher than dollar-denominated credit, but bank loans in dong are still the option preferred by many enterprises looking to raise capital for developing production and trading.
The current interest rate on dong loans that local commercial banks are charging enterprises is 10.5 per cent per annum, as against rates of 5-6 per cent for loans in US dollars.
Enterprises cite two reasons for their preference. One is the capricious nature of exchange rates between the dong and dollar; and the other is the desire to take advantage of the interest-rate subsidy offered by the Government to help offset the impacts of the global recession.
Going by current trends, enterprises are worried that if they borrow dollar-denominated loans they might have to pay back large, additional sums of money to buy dollars needed to pay back their debts.
The second reason is more important. Under the Government’s ongoing subsidised lending programme, eligible enterprises would have 4 percentage points taken off from lending rates if they borrow loans in dong from commercial banks to develop their businesses. Dollar loans are not eligible for this support.
In the first two months of the year, total dong loans granted by commercial banks in HCM City were up 14 per cent over the same period last year, while the corresponding increase in dollar loans was 11.4 per cent.
Viet Kieu housing dogged
The Government is serious about facilitating the purchase of houses in Viet Nam by overseas Vietnamese (Viet Kieu) who want to live and work in their home country.
Early last week, the Nationality Council and various committees of the National Assembly discussed a policy to expand the number of Viet Kieu eligible to buy houses in Viet Nam.
However, the intended beneficiaries of the new policy are sceptical that it will succeed in removing the obstacles they have faced over several years now in trying to purchase a house.
Since the Government issued a policy seven years ago allowing Viet Kieu to buy houses in Viet Nam, only 140 people have to date obtained the ownership certificates for a house in the country. This works out to an average of 20 each year, which is quite low compared to the number of Viet Kieu who are looking to buy houses in Viet Nam and have the wherewithal to do so.
The de facto number of Viet Kieu owning a house in Viet Nam may be a little higher because several choose to avoid the lengthy and complicated procedures and buy the houses under their relatives’ names.
The main obstacle is that the law does not clearly identify and define who an overseas Vietnamese is. A draft decree divides Viet Kieu into two categories. Vietnamese citizens who live and work abroad and foreign-passport holders who have retained their Vietnamese nationality fall under one category.
The other category includes ethnic Vietnamese expatriates who have been in Viet Nam for at least six months or who have been granted visa exemption.
Many say that some of the regulations under the current decree are quite ambiguous, so they do not know if they are eligible, and if they are, what they have to do to buy a house.
Some have said that the decrees do not have the same standing as a law, and are concerned they might still face difficulties when working with local authorities. For instance, they have been required to produce locally issued identity cards and residential certificates, when the law only requires them to have a valid passport and visa.
Paltry trade promotion
Viet Nam is a country whose growth relies mainly on exports, so trade promotion is an indispensable activity, more so now when exporters are badly affected by the global economic turmoil.
The Ministry of Industry and Trade has just designed a package of trade promotion measures in an attempt to rehabilitate the market and therefore push up exports.
One of them will provide direct financial support to exporters. For instance, those who travel abroad seeking business opportunities and succeed in signing export contracts will have their promotion expenses reimbursed by the ministry.
Vietnamese exporters will also receive support from the Trade Promotion Department to organise international conferences that focus on introducing Vietnamese products with high potential for exports.
The ministry also has a plan to enhance the abilities of Viet Nam’s trade offices abroad so they can assist domestic exporters more effectively. The offices would be assigned with a concrete mission, and provided with funds to implement it. This would involve identifying potential importers, distribution networks and providing timely information to Vietnamese exporters.
They will also be asked to take the initiative and promote Vietnamese export commodities at overseas markets.
The department will not only help Vietnamese enterprises go abroad and seek customers, but also foreign companies who visit Viet Nam looking for opportunities to import Vietnamese goods.
But trade promotion experts say that these measures cannot be implemented effectively unless the Government injects more money into trade promotion activities.
Viet Nam’s current annual budget for trade promotion is considered to be among the lowest in the world; much lower than the practical demands of domestic export enterprises.
The Viet Nam Textile and Garments Association says it needs at least VND50 billion ($2.8 million) for trade promotion activities this year, while the total national budget is set at VND90 billion.
The Viet Nam Coffee and Cocoa Association, meanwhile, complains that in 2008 the industry exported goods worth $2 billion, but was allocated only VND330 million this year for trade promotion activities.
The trade ministry has already asked the Government to allot more funds for trade promotion, and Prime Minister Nguyen Tan Dung has agreed with the ministry’s proposal in principle.
VietNamNet/Viet Nam News
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