VietNamNet Bridge – The State Bank of Vietnam has requested
commercial banks to push up lending to ease the enterprises’ thirst for capital
caused by the tightened monetary policies.
Vo Tri Thanh, Deputy Head of the
Central Institute of Economic Management (CIEM), when asked to make predictions
about the national economy in the last months of 2012 and in 2013, said: “I
believe that the national economy would witness “big changes,” at least until
the first half of 2013.”
The answer has been described as
containing “deep implications.”
Following a difficult 2011year,
Vietnam has experienced tough days since the beginning of 2012. The GDP in the
first six months of the year grew by only 4.38 percent in comparison with the
same period of the last year, while credit has been standing still and 30,000
businesses have reportedly dissolved or stopped operation.
Having no capital, sitting idle
Phap luat Vietnam has quoted a
survey conducted by the Da Nang City Socio-Economic Development Research
Institute, as saying that 72 percent of businesses in the central region and
Central Highlands need capital to maintain production. However, only 34 percent
of businesses can access bank loans, while 66 percent say they do not think
they can borrow money from banks.
Having no collateral remains the
biggest barrier that prevents businesses from accessing bank loans. Meanwhile,
the director of a state owned bank said in the interview given to the local
press, that the bank would not loosen the requirements on borrowers, though it
has profuse capital and really wants to push up lending.
Pham Hung Ut, Deputy Chair of Tan
Phu District People’s Committee said on Saigon Dau tu that though commercial
banks have launched low cost credit packages, capital remains without of the
reach of businesses.
Businesses have urged banks to
lend money without requiring mortgaged assets. However, banks have “refused
with a shake of the head”, because they find the lending is risky in the
context of the weak purchasing power in the market.
Seeking capital from foreign sources, why not?
Dominic Price, Chief Executive Officer
of JP Morgan Vietnam, has suggested that mobilizing capital from foreign
sources would be a reasonable solution for now, if it’s difficult to seek
capital from domestic sources.
The Vietnamese stock market
remains a fledgling with the modest trading volume of 25-30 million dollars per
day. Meanwhile, commercial banks keep tightened lending policies, thus making
the capital inaccessible for the majority of businesses.
In 2011, Vietnam witnessed 260
merger and acquisition (M&A) deals worth 3.7 billion dollars. The deals
mostly made in the fields of processing industry, accounting for 24 percent of
the total affairs in 2011, fast consumer goods (20 percent), materials (16
percent), banking (15 percent) and real estate (8 percent).
Besides, Vietnamese businesses
can also seek capital on the international market by issuing shares,
international convertible bonds, borrowing commercial loans. Especially, they
can also list their shares on foreign bourses to mobilize capital through the
market.
Truong Dinh Tuyen, former
Minister of Trade, a well-known economist, also agrees that businesses should
look for foreign capital. However, sharing with Thanh, Tuyen has warned that
very few Vietnamese businesses can find capital that way.
The domestic corporate bond
market remains young, while businesses have not got used to issuing bonds to
call for capital. Vingroup is just one of the very few Vietnamese businesses
which have succeeded in issuing bonds in Singapore.
According to Thanh, it would take
7-10 years to build up a domestic bond market.
Compiled by C. V
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