Private firms in Vietnam are trying to seek low-cost capital from foreign sources since lending interest rates offered by local banks are reportedly ten times higher than the world’s average level.
Dollar lending rate in the world market is hovering around 1% per annum, which means that enterprises must pay between 3% and 4% at maximum for loans plus expenses, compared to a common rate of 5.5%-6% at local banks.
Meanwhile, if borrowing money from foreign sources, firms can obtain long-term loans, while Vietnamese banks mostly offer short-term loans.
Within business circles, rumor has it that a “big guy” in the real estate sector is negotiating with a German bank for a loan worth hundreds of millions of dollars to fund a high-grade shopping mall project in Hanoi.
Vincom, a real estate developer that successfully issued corporate bonds on the international market, often introduces itself to foreign financial institutions to mobilize capital from difference if necessary, said Vincom Chairman Le Khac Hiep.
Hiep added that in order to borrow capital from foreign sources, enterprises need to prove that they have feasible projects and healthy financial practices, which can be certified by auditing firms
The biggest obstacle to foreign capital is the lack of mortgaged assets. The land use right is not valuable, because, if borrowers cannot pay debts, foreign creditors cannot seize the land.
The newswire quoted a source from the State Bank of Vietnam as saying that some joint-stock banks and private economic conglomerates are asking about procedures to borrow money from foreign sources, while State-owned corporations are planning to issue corporate bonds on an international scale.
“If such kinds of loans climb sharply, this may cause problems to local financial system,” an official from the State Bank commented.
The National Financial Supervision Committee has warned about risks of foreign debts, especially capital flow under the mode of carry trade.
Total outstanding loans in foreign currencies, mostly U.S. dollar, are now VND40 trillion higher than deposit balances in foreign currencies. This reveals that at least VND40 trillion, or more than $2 billion, in carry trade has been poured to Vietnam.
Associate Professor Dr. Vo Dai Luoc from the Vietnam Academy of Social Sciences stated that there is no big problem with a sum of $2 billion, but if loans reach $10 billion and the world’s interest rates fluctuate, capital withdrawal will threaten Vietnam’s financial stability. (VnExpress, Securities Investment)
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