[NEWS] - Urgently removing difficulties in capital to support exports

Capital and interest rates will continue to be "hot" issues mentioned by industry associations at the Conference "Removing difficulties in production and business and boosting exports" held by the Ministry of Industry and Trade on April 25.

Lack of capital for purchasing rice and seafood

Chairman of the Vietnam Food Association (VFA) - Mr. Nguyen Ngoc Nam shared that credit is currently the most concerned issue for rice exporters in the Mekong Delta. Most traders are facing problems in accessing credit capital and especially working capital.

Meanwhile, the rice trade market in recent years has fluctuated, and even the domestic supply at some points has been unbalanced. Therefore, the credit limit makes the merchant’s purchasing progress significantly affected.

According to Mr. Nguyen Ngoc Nam, at the time of the main harvest season (February, 3, 4, 7, 8, and 10 every year), rice purchasing has encountered many difficulties and banks cannot actively open more credit lines (calculated from time to time) for rice exporters. Along with that, with the characteristics of using large financial leverage, maintaining the circulating reserve level at about 5% according to Decree 107/2018/ND-CP provisions also creates enormous pressure on rice exporters.

Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP) - Mr. Nguyen Hoai Nam also mentioned that currently, seafood export orders and prices are on a solid downward trend. Businesses limit and interrupt cash flow, putting pressure on purchasing raw materials for people and paying due loans from banks.

In addition, since the third quarter of 2022, many banks have announced and applied to increase the USD loan interest rate from 2.1-2.8% to 3-3.3% and even to 4.5%, while businesses in the seafood sector mainly borrow USD. Currently, USD loan interest rates are at the highest level of 4.2% - 4.9% in the context of the decline in production - export.

Mr. Nguyen Hoai Nam has expressed concern about credit tightening, limiting lending below the granted credit limit, new loans are only disbursed in proportion to old loans when they have to be repaid before. This has made it difficult for businesses when financial costs are increasing, not being proactive in purchasing raw materials for farmers - fishermen in the current period.

Many proposals to remove difficulties in capital

In the face of the above difficulties, Mr. Nguyen Ngoc Nam proposed to the Government and the State Bank to have specific preferential mechanisms and policies to support capital for rice export traders, and at the same time create conditions for traders to have more financial resources to purchase for temporary storage, contributing to stabilizing output prices for farmers during the main harvest season, and contributing to the business community’s increase in business efficiency.

More specifically, it is necessary to increase short-term capital at the time of the main harvest season and continue to guide traders to access capital at low-interest rates in a more effective way to assist traders in purchasing for temporary storage and stabilizing production. In addition, strengthen the policy of unsecured lending.

This policy may only need to be applied during the peak harvest periods and must be based on the results of the capacity assessment and business history of each enterprise to have suitable sponsorship programs for each object or group.

Banks also need to have plans to stabilize interest rates for specific terms or have separate regulatory policies for businesses in the agricultural sector in general and for rice businesses, in particular, to support businesses to maintain stable and sustainable production and business activities. As for the seafood sector, Mr. Nguyen Hoai Nam also suggested the banking industry reduce the USD loan interest rate to below 4% to support export enterprises.

Vice Chairman of the Vietnam Textile and Apparel Association - Mr. Tran Nhu Tung also proposed that the Government have a preferential interest rate package with 0% to pay wages to employees, similar to the loan package that the Bank for Social Policies implemented during the Covid-19 epidemic. This policy will also help businesses reduce financial pressure to pay employees to retain employees during the current difficult period.

Mr. Tung also proposed the State Bank study and propose to change the conditions for accessing the interest rate compensation package of about 2% and direct commercial banks to urgently deploy to businesses to borrow and with the support of the Corporate Guarantee Fund so that commercial banks can have more confidence in lending.

Sharing with businesses, Deputy Director of the State Bank of Vietnam’s Ho Chi Minh City Branch Nguyen Duc Lenh said that in the first quarter of 2023, the State Bank of Vietnam issued two rather large policies that have a direct impact on supporting businesses. Firstly, in the first quarter of 2023, the State Bank made two adjustments to reduce interest rates, especially the recent adjustment to set the ceiling interest rate for deposits from 6 months or less to 5.5%, the interest rate on demand deposits from 1% to 0.5%, thereby also directly affecting deposit interest rates and serving as a basis for reducing loan interest rates.

The second is the issuance of a policy on structuring the debt term and keeping the debt group unchanged for customers. This is also a mechanism that will support businesses to reduce debt repayment pressure as well as create conditions for corporate capital to maintain stability and overcome difficult times.

Mr. Nguyen Duc Lenh also said that since 2012, the export sector is still in the group of short-term loans in VND with a relatively low-interest rate of only 4.5%. In addition, export enterprises or processing and manufacturing industries are also in the group entitled to the Government’s 2% interest rate support package. Although the disbursement of this package is still quite slow, the reason is that this policy supports the use of the Government’s budget and is implemented through commercial banks. Therefore, the need to ensure loan conditions and caution in the use of budget capital are also influencing factors.

The problem is related to the credit limit, Mr. Lenh said, in 2023, the State Bank is aiming for a credit growth of 14-15%. Therefore, this year the capital will not be burdened by the credit limit.

However, with many recommendations and proposals from businesses and associations, Mr. Lenh also said he would record and report to the State Bank for research and appropriate adjustments.

Hoang Yen (Collection source)