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High interest, dollar rates hurt local firms
High interest rates and the dong’s depreciation are proving to be a double whammy for businesses.
Nguyen Van Lanh, Deputy Director of Phuc Thinh Vina Limited Company, a Ho Chi Minh City-based fertilizer maker, said his company has to pay 20 percent interest on loans it got recently but its profits cannot offset it.
“We are also being hurt by a rise in the dollar’s value against the dong.”
The firm hiked prices by 12 percent in the past two months, which hit demand and which in turn forced it to cut monthly production from 1,800 tons to a mere 500 tons.
Nguyen Thi Nhu Thai, Director of the Dong Nai-based Truong Lam Thinh Company, claimed that since dollars are now traded at a premium of up to 10 percent, it has become costly for businesses to import raw materials for production.
Even worse, businesses cannot expand because banks are unwilling to lend, D., Director of an agro-produce exporter based in HCMC, said.
There are few sectors in which businesses can earn enough profits to offset bank interest rates which have climbed to 20 percent, Nguyen Ngoc Hoa, chairman of Vietnam’s leading supermarket chain, Saigon Co.op, said.
Saigon Co.op is set to cut investments, keeping only vital projects, Hoa revealed.
Tran Nganh, director of a stationery firm in HCMC, told Tuoi Tre he has cancelled plans to borrow VND3 billion (US$145,000) to expand the business because of the double burden of high interest rates and volatile exchange rates.
N.A., owner of a city-based garment firm, said he was forced to call off plans to borrow VND500 million-1 billion ($24,180 – 48,360) in mid-2010 to build housing for his 300 workers.
The government should adopt flexible policies, businesses said.
“We hope this is just a temporary phase. If the interest rate continues to stay as high as it is now, no business can afford it,” Hoa said.
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