Vietnam - Government looks to cut interest rates

The interest rates cap is likely to be further lowered to ease the credit crunch that has driven numerous enterprises to dissolution, the Government's top leader said at a monthly Cabinet meeting yesterday.

The deposit interest rate has been cut by 2 per cent twice this year, to 12 per cent per annum, while the credit interest rate dropped by 1-1.5 per cent from earlier this year.

However, Cabinet members agreed that the rates remained high.

Prime Minister Nguyen Tan Dung directed ministries and concerned agencies to adopt the measure amongst other taxing and monetary policies to help enterprises stay in business.

Statistics from the two-day meeting also revealed that the number of enterprises that dissolved or ceased operations rose to over 17,700 in the first four months this year, up 9.5 per cent against the same period last year.

As of April 30, 71.6 per cent of enterprises have remained in operation out of more than 647,600 nation-wide. The problem has been traced back to gloomy global and domestic economic conditions as well as poor enterprise capacity.

Minister of Planning and Investment Bui Quang Vinh said 71.6 per cent was an acceptable rate compared to the average world level, but that it was worrying to see the downtrend affect new establishments.

Dung said the Government would issue new measures to help enterprises face difficulties.

Accordingly, a number of measures will be rolled out including a payment extension on personal income tax, import tax and value added tax.

Enterprises will receive additional assistance in selling off stockpiled goods through campaigns to promote consumption and the distribution of goods in rural areas.

Over the long run, the Government will invest in trade promotion activities, expand export markets and support human resource training in selected industries.

The Planning and Investment Ministry proposed stabilising the macro economy, controlling inflation, lowering lending interest rates, restructuring the economy and enhancing economic forecast capacity.

According to Chairman of the Viet Nam Chamber of Commerce and Industry (VCCI) Vu Tien Loc, his organisation's survey showed that despite an economic downturn, the majority of enterprises were striving to sustain operations, a few even managing to expand.

Domestic and foreign investors remain upbeat regarding the medium-and-long-term prosperity of the national economy and Government measures.

Enterprises remain adamant that current difficulties will serve the macro economic environment well in future, Loc said.

Other issues

At the meeting, Cabinet members deliberated on various other economic issues.

Since July 2011, the Consumer Price Index (CPI) has maintained its lowest increase rate in comparison with previous years, rising by 1 per cent in January, 1.37 per cent in February, 0.16 per cent in March and 0.05 per cent in April.

Minister of Trade and Industry Vu Huy Hoang and Minister of Labour, Invalids and Social Affairs Pham Thi Hai Chuyen suggested that this year's CPI should not fall below 9 per cent to avoid affecting the economic growth rate and causing shock to the economy.

Members affirmed the estimated Gross Domestic Product (GDP) rate of 4 per cent in the first quarter was far lower than during the same period two years ago, but agreed it was reasonable given targets to rein in inflation and stabilise the macro economy have been partially reached.

However, some expressed concern over shortcomings in the national economy, such as the plunge in credit loans, poor enterprise capacity to absorb credit and low industrial growth.

Minister of Agriculture and Rural Development Cao Duc Phat and Governor of the State Bank of Viet Nam (SBV) Nguyen Van Binh urged speedy disbursement and capital allocation in public investment projects and the generation of jobs amongst those who were laid off by recently dissolved enterprises.

During the session, Dung ordered the SBV to restructure the banking system, ensuring banking liability and effective measures in tackling bad debt.

The meeting further heard discussions on a draft plan to restructure State-owned enterprises.

VNS

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