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Banks urged to help firms
State-owned banks should act as co-ordinators and guide the credit and monetary market in ways that can help enterprises access loans and banks pump money into the economy, senior economists said at a conference in HCM City on Friday.
The conference was organised by the Viet Nam Chamber of Commerce and Industry (VCCI), Dien Dan Doanh Nghiep newspaper and HDBank.
It sought measures to unclog capital flows and ensure effective injection of capital into the economy. Experts said any measure taken needed the backing of Government policies as well as a supporting role played by State-owned banks.
They did not, however, elaborate on the specific ways in which they expected State-owned banks to support commercial banks.
The Vietnamese economy has recently seen signs of recovery with a significant decrease in inflation in the third quarter over the first and second quarters, and an increase in the Gross Domestic Product (GDP).
Economists said at the conference that inflation could be kept at between 7 and 8 per cent this year, while the GDP growth rate will be between 5.3 and 5.5 per cent.
The Government has issued several monetary and credit policies in an attempt to stabilise the macreconomy, promote sustainable growth and support domestic enterprises overcome difficulties.
These include Resolutions No.01 and 13, SBV's Circular 20/2012/TT-NHNN and several other directives from the central bank.
The Government's measures have worked, economists felt. The short-term business environment improved, as did the banking sector's liquidity, compared with 2011. Both lending and deposit rates were cut significantly.
Despite the positive changes, both banks and enterprises are still facing many difficulties, the conference heard.
"Although the lending interest rate has dropped, enterprises have still found it very difficult to access bank loans because of bad debts," said Tran Ngoc Liem, deputy director of the Viet Nam Chamber of Commerce and Industry (VCCI) in HCMC.
"Most of them do not have enough conditions, particularly assets to offer as collateral, as required by commercial banks. In addition, they face many other obstacles caused by the prolonged crisis," he said.
Consequently, over 35,000 enterprises have shut down so far this year, while those that are still operating have had to cut back on production because of a lack of capital.
As far as the banks are concerned,many of them have plentiful capital, but they cannot lend because enterprises do not meet their requirements, according to Liem. The result is that the banks' capital cannot be pumped into the economy.
"Credit institutions that have healthy operations, ensured liquidity, and actively implement the Government's policy of supporting enterprises should be supported by helping them settle bad debts, since this is the biggest problem of the two sides," he said.
He said the Government should set up a debt trading company or appoint the central bank to buy bad debts.
Dr. Tran Du Lich, member of the National Monetary Policy Advisory Council, also said that bad debts, and not interest rates, are the reason enterprises are unable to access bank loans.
He suggested that commercial banks seriously implement the central bank's policy of setting aside funds for bad-debt reserves and reduce risks. So far, they have been lax in doing so as they remained focused on maximising profits.
"To do this, they must cut profit, management costs, and salary," Lich said.
"The commercial banks should be allowed to suspend bad debts for enterprises with real potential while credit guarantee funds established by the government should further strengthen their roles in assisting enterprises borrow money from the banks," he said.
Lich stressed the need for policy initiatives from the Government to regain market confidence.
"Enterprises are facing many difficulties such as very high input costs, lack of working capital, high inventory and narrowed consumption market. At the same time, they do not have feasible projects, assets to offer as collateral and are facing big bad debts," said Le Thi Xuan of the Viet Nam Banking Association in HCM City.
She said the banking sector reflects the increasing imbalance between capital mobilisation and lending with growth rates of over 10 per cent and 1.4 per cent respectively.
Xuan said inventory was one of the biggest obstacles facing enterprises. She said once unsold stock was cleared, producers would continue borrowing money to reinvest and develop their business.
Xuan suggested reducing the import of commodities that can be produced by domestic firms, and called for the active launching of promotion programmes at home and aboard. She also said producers must be exempted from valued-added tax so that they can cut selling prices and increase sales.
Enterprises and banks should work together to reschedule debts based on the central bank's guidelines to enable the former get new loans for production activities.
She also agreed with Lich that the model of credit guarantee funds for small and medium-d enterprises, which is now done by the central Government, should be expanded and established at different levels.
Pham Thien Long, deputy director of the HDBank, also said that it would require great efforts from both the banks and enterprises to ensure that capital can be injected effectively into the economy.
Among several necessary steps, the banks should actively create many preferential credit packages to support enterprises, particularly those that have potential are caught up in difficulties due to weak management skills, Long said.
For their part, enterprises should pay attention to making their financial information transparent and actively participate in the banks' preferential credit schemes and service packages to cut their capital costs, he said.
However, the success or failure of all the aforesaid measures would depend on the policy support provided by the Government and State-run banks, the experts reiterated.
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