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Plantations to receive preferential loans
Prime Minister Nguyen Tan Dung has issued a decision allowing investors in plantations to take loans from the Viet Nam Development Bank (VDB), the government website reported last Friday.
The decision applies to investors who own projects under the national forestry programme which aims to plant 5 million hectares of forest by the end of this year to increase forest coverage in the country to 43 percent.
Access to these loans is expected to help enhance development of the national programme that also seeks to use barren land nationwide for generating income for residents in rural and mountainous areas.
By 2008, the programme had developed 614,113ha of plantations, allocated 1 million hectares of forest for restoration, and placed 2.3 million hectares under protection. The programme aims to plant an additional 386,000ha of forests in the 2009-2010 period.
More investment
The central bank Governor, Nguyen Van Giau, in a recent working visit to southern provinces, asked credit institutions including commercial banks to intensify investment in agricultural production and rural development.
He also instructed branches of commercial banks to maintain economic development targets of localities so that they can effectively allocate capital sources.
Giau, however, told them to give investment priorities to agricultural production and rural development activities.
According to the governor's outlook, credit institutions in the Cuu Long (Mekong) Delta and the southeast region have done a good job of implementing the Government's lending interest subsidy policy and investment plans related to economic restructuring.
The credit institutions have already created many channels to inject more capital into agriculture, fisheries, trade, services and the border economy.
As a result, many small – and medium-d enterprises in these areas had sufficient finances to produce consumer goods and export products in accordance with localities'key economic objectives.
By 2009 credit institutions'outstanding loans in southeast and southwest provinces had reached VND24 trillion, including loans given under the Government's interest subsidy programme.
The banks' investments helped enterprises renew production technology and develop production, thus creating employment for local people.
These improvements have contributed to increasing the use of input materials, particularly food and fishery products, but also stimulating consumption and exports.
These results helped ease the country's recession and ensure social security in rural areas.
Despite the credit institutions'efforts, provinces in the Cuu Long (Mekong) Delta, in particular, and the southeast region continue to be short of capital.
Nguyen Danh Trong, Deputy Director of the State Bank of Viet Nam's Monetary Policy Department, said capital demand of rural areas was often higher than the capital mobilised there.
In the Cuu Long (Mekong) Delta, for example, the entire banking system by late 2009 had mobilised about VND115 trillion but outstanding loans that the banks handed out to people, organisations and enterprises totalled VND174 trillion.
As a result, the farmers in the delta, although the country's biggest rice producer with annual output of about 20 million tonnes, were always short of capital, he said.
In the delta, Nguyen Tri Ngoc, Director of the Cultivation Department, said a considerable number of local farmers did not have farmland so they must pay a great deal of money to rent land.
In addition, they also need capital to buy seeds and fertilisers and many other kinds of agricultural materials for production.
Meanwhile, available capital sources at local credit institutions failed to meet capital demand, and delta farmers had to use credit sources from the free market, with extremely high interest, Ngoc said.
Consequently, they had to use most of their profits that they had gained from their farming to pay back loans and interest.
Capital shortage
To settle the shortage of capital in rural areas, the State Bank of Viet Nam is preparing to soon issue a new decree that will push up credit-related services for the development of agricultural production and rural areas, according to Trong.
The new decree will include many more open lending regulations that will give farmers easier access to bank loans.
The new policy is expected to help farmers and rural agricultural enterprises ease their capital pressure, thus creating favourable conditions for agriculture production and rural areas to develop.
The decree would also have specific regulations that help credit institutions to reduce risks that they might suffer from investing in agriculture and rural areas.
It will also give several preferences, including refinancing and low reserve rates, to state-owned commercial banks that participate in lending in rural areas.
These incentive policies would encourage banks to further invest into agriculture and rural areas.
Prior to this decree, the Lien Viet Commercial Joint Stock Bank (LienVietbank) had become the banking industry's pioneer in promoting credit activities to develop agriculture and rural areas in the Cuu Long Delta.
Under its newly announced project, between 2010-2013, LienVietbank will set aside loans worth VND3-5 trillion to provide for households, individuals, farm owners, agricultural cooperatives and those that provide services related to cultivation, breeding, and processing and trading of agricultural products in the Cuu Long Delta.
In 2010, the bank will disburse about VND1.2 trillion in loans in this region.
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