Rescuing Businesses by Resolving Bad Debts

A high deposit rate will lead to a flow of the idle capital from the public into banks instead of businesses. Thus, businesses are lacking the necessary fund to continue their operations. At the same time, this has brought huge profit for heavily-funded investors. They only need to deposit their money into banks and let the multiplier effect do the job without themselves having to work hard, which negatively impacts businesses operations.

 

The high deposit rate in Vietnam is a complete contrast to what is happening around the world. In 2011, there was time when the interest rate of middle-term loans reached 24 percent per year. With this "cutting throat" interest rate level, only businesses with advantages in land and relationship could access the capital. The rest of businesses had difficulty in accessing the banks' capital. At the same time, invested capital from investors is limited (because money has been deposited into banks to earn high interest). Therefore, already weak businesses lacking of capital could not sustain their operations; they did not generate any profit, but have to concurrently endure high interest rate from banks, therefore the inevitable bad debt situation.

 

At the moment businesses are counting on a rescue package to quickly resolve their bad debts and sustain their operations.

 

In order to prevent a resurgence of inflation with sky-rocketing prices and a decreasing standard of living, the Government should not use funds from the national budget to eliminate bad debts in the real estate and stock markets, but should instead prioritise resolving bad debts for production companies, import-export businesses and businesses in the agricultural sector; businesses with good project plans, which is halted due to lack or loss of funds because of overlapping mechanisms and policies, should be supplied with additional capital to complete their projects and quickly retrieve the invested capital. Capital and infrastructure development projects should be top priority.

 

Together with the Vietnamese government, banks have to initiate policies to help businesses finalise the total amount of debt; reorganize and restructure their operations; create a legal corridor for merger and acquisition and focus on the transfer of real estate deeds in a timely manner.

 

At the moment, businesses are expecting plans to revive their operations and rescue businesses which are still capable of sustaining their operations. Once businesses recover, the economy can finally overcome the crisis and its own stagnancy.