Banks United to Revive Construction Industry

On March 25, in Ho Chi Minh City, Vietnam Construction Bank (VNCB) in collaboration with Thien Thanh Group officially announced the VND50,000 billion credit package through the four-players construction linkage chain: Banks, investors, construction & construction materials companies, customers and the VND50,000 billion package.

 

According to VNCB General Director Phan Thanh Mai, there are ten banks participating in the chain including four state commercial banks namely BIDV, Vietcombank, Agribank, Vietinbank (the “Buyer Banks”) and six commercial banks namely ACB, Sacombank, Lienvietpostbank, MB, VPB, Oceanbank (the “co-sponsored banks”). VNCB is the organising bank.

 

The credit package will help build a professional building materials trading floor, maximising efficiency for all parties in construction market and credit security for banks providing credit, freeing the flow of building materials through the form of deferred payments, reducing the cash flow to bring down inflation, helping enterprises access new credit despite existing loans etc, creating a closed circle to ensure all parties’ interests, especially clients by providing quality products.

 

 The soon-to-be-signed contracts first includes those between material suppliers and manufacturers, then through building materials trading floor - Thien Thanh Group (TTG), manufacturers will sign contracts with contractors, and contractors will sign construction contracts with investors. The VND50,000 billion credit package with preferential interest rates will be injected into this linkage chain through the organising bank VNCB.

 

By participating in this chain, parties involved such as investors, contractors or manufacturers will have the new benefit of accessing new credit despite existing loans and concessional loans. It will also ensure the payment schedule for contractors; help free inventories in large quantities and ensure payment schedule for manufacturers, etc. The buyer banks will issue credit guarantees and disburse to investors, while VNCB will issue credit guarantees for contractors and manufacturers, the co-sponsored banks will guarantee TTG.

 

Speaking of this model, Mr Nguyen Viet Manh, Director General of the Department of State Bank Credit said that this was not a new model of collaboration but the banks currently had the weakness of lack of connecting in implementation. It’s crucial that all “players” must unite under the supervision of banks, especially the capital flow must be managed and paid appropriately. That would help cut down construction inventory, reduce real estate, remove difficulties for unfinished projects, strengthen all parties’ confidence, improve transparency and limit corruption as well as duplicated credit supply. Especially, according to Mr Manh, in addition to VND50,000 billion listed in VNCB report, seven more banks had registered with the State Bank VND70,000 billion (normal loans serves real estate provided by credit institution’s fund), this credit package can be about VND120,000 billion.

 

To avoid the shortcomings of the VND30,000 billion package, banks must agree on common standards and apply it synchronously. That includes specific loan terms, borrowers, credit targets, etc. Another must is to minimise the administrative procedures as well as selected loan projects carefully. Economist Nguyen Tri Hieu

“Seeing the reality of credit packages in projects such as Highway 1 and Highway 14, most contractors are reluctant. But the join-in of the BIDV and VNCB accelerated those projects’ construction schedule to the finish. This model is an extension from that example for civil construction and real estate so there’s a high chance that it will bring about positive results. At least at first, the bank can control the flow of capital, bad debt, thereby promoting market development,” said Economic Expert Le Xuan Nghia.