Many local small- and medium-sized
enterprises have fallen into the vicious circle of borrowing loan – clearing
debt, with the debts continuously expanding, forcing the debtors to bargain
away their assets.
Even
worse, many business owners have ended up defaulting on their debts when their
liquidation does not even help to clear the liability worth hundreds of
billions of dong, in addition to the interest of loans they have borrowed at
exorbitant rates.
Debt after debt
DB, a
privately-owned a wood processor and exporter based at the Dong Nai-based Bien
Hoa 2 Industrial Park, has, over the last few days, been operating without its
director, who has defaulted on a massive debt.
“The
debt is enlarged day by day, while all of the company’s assets have been sold,”
lamented V, the facility’s manager.
The
company currently owes salary to around 100 workers, said V.
The
manager said that in mid-2011, the company borrowed 1.6 billion dong
(US$76,800) from an unofficial source to set up two more facilities and buy
more machinery at an exorbitant interest rate of 7 percent a month.
“What
we didn’t expect is that our operation has since faced order shortages,” said
V.
“We had
to mortgage two cars just to have money for interest clearance.”
Meanwhile,
on the afternoon of April 9, several laborers of the TT garment company in Hoc
Mon District blocked the entrance of the facility to prevent the company from
transferring machinery, a move thought to be related to debt defaulting.
The
workers have yet to receive their last month’s wages, they said.
“The
company is beleaguered by debt, and owes laborers 400 million dong of payment,”
said Bui Thi Tuyet Nhung, chairwoman of the district trade union.
“After
the union’s intervention, the company eventually paid the workers. But we have
no idea how large its debt is, since the company owner refused to show up.”
On
April 13, the last piece of machinery was carried away to be sold, Tuoi Tre
newspaper observed.
Mortgaging assets
Besides
bargaining away machines, many debt-stricken companies have mortgaged their
assets to borrow loans at painful rates, said the owner of a garment facility
in HCM City.
Some
could borrow without collateral, but the interest eventually rose to an amount
doubling or tripling the original loan, driving the borrowers to having their
houses seized, he added.
For
instance, a restaurant in District 1 borrowed 3.7 billion dong to maintain
operations amid financial difficulties. After clearing VND726 million of
interest, the business could no longer afford it.
Finally,
they had to suffer a total debt of as much as 8 billion dong, more than double
the original loan.
“Many
businesses are in such a tough situation that no matter how hard they try, they
still cannot afford to clear loan interest,” said H.A., a credit officer at a
HCM City-based bank.
“A
customer of mine has borrowed 750 billion dong from seven different banks, and
is now struggling to settle the debts,” he said.
Tuoi
Tre
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