Vietnam - Government to support failing firms

The Government will announce new policies next month to offer more assistance to enterprises facing difficulties, says Vo Tri Thanh, deputy director of the Central Institute for Economic Management.

Thanh said at a forum held in HCM City on April 19 that the country’s economy was sluggish in several areas at present.

Petroleum imports have dropped 20 percent because the market’s purchasing power has continuously decreased over the last seven months and inventories have piled up.

Production and business activities appeared to have worsened in the first quarter of this year, which is a warning that Vietnam would find it difficult to realize its GDP growth target of 6 percent this year, he said.

Cao Sy Kiem, chairman of the Small and Medium Enterprises Association, also said that the domestic capital markets have never been as “deformed and complicated” as they are now.

“To save enterprises, the Government has already implemented several measures and will carry out several more in May,” Thanh said.

The new measures are divided into two groups. The first group will include measures that will provide direct support to enterprises, like extension of deadline for tax payment, tax exemption and reduction, he said.

Lowering lending interest rates in order to help enterprises access bank loans is also a measure that will fall in the first group.

“Measures in the second group will focus on demand stimulation to improve purchasing power in the domestic market,” Thanh said.

The measures that aim to create conditions for enterprises to access bank loans are considered to be the most important.

In addition to lowering lending interest rates, commercial banks will have to restructure enterprises’ old debts, reschedule them and then consider giving new loans, he said.

However, Thanh also said that this package of support measures would be mainly applied to small-and medium-sized enterprises (SMEs), particularly those involved in export, rural and agriculture areas.

Ly Xuan Hai, general director of Asia Commercial Bank (ACB), also said at the forum that about one third of SMEs are finding it difficult to access bank loans. Thirty percent are having to borrow capital from other sources at very high interest rates.

Complicated procedures, lack of collateral assets, high lending interest rates and difficulties in showing evidence of income were among obstacles that make it difficult for SMEs to access bank loans, Hai said.

To stimulate demand, the Government will encourage commercial banks to step up personal loans and reduce value-added-tax (VAT) on some products, Thanh said.

It will also provide stronger support for social welfare activities in areas where a majority of residents are low-income earners, he added.

To improve liquidity in the real estate market and supplement its social housing fund, the Government plans to buy some property development projects.

In addition to the above measures, the Government should also target macro-economic stability to boost confidence among people and enterprises, Thanh said.

“When people regain confidence, money flow will quicken in the market and production and trading activities will also recover quickly,” he said.

“I know that people are still keeping very large volumes of cash while the circulation of the currency is very slow, at just 0.8 times per year which is much lower than the 2.5 times recorded when the economy is stable.”

The forum was jointly held by the Saigon Tiep Thi newspaper, the Ministry of Industry and Trade and the HCM City People’s Committee.

VNS

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