In the content of credit of the workshop on large-scale agricultural production development and application high technology on May 15, the State Bank of Vietnam (SBV) again explained the real credit growth which is not as expected.
Addressing the workshop, Deputy Director of Monetary Policy Department (SBV) Pham Xuan Hoe said that although credit growth has gradually improved (8.9 percent in 2012 and over 12 percent in 2013), it has been assessed as to not meeting expectation; credit flow is not really smooth.
Mr Hoe analyzed the causes quite specifically.
First, there remain many limitations in Vietnam's economy; the economic structure changes slowly; the competitiveness of the economy remains low; the capacity to absorb capital keeps declining. Economic growth in the 2012-2015 period is mainly coming from external sectors (exports and FDI) while the domestic enterprise sector faces several difficulties with low productivity.
Taking a more specific look into customer areas, we can see that "big" state-owned enterprises are struggling during their restructuring and equitisation; two sectors which consume many loans including steel and cement production have decreased their production capacity since domestic demand fell, which has limited the chance to increase of credit.
The private business sector has seen the failure of more than 60,000 enterprises due to difficulties or unsuitable operation. Mr Hoe shared that currently enterprises of this sector are now huddling and fighting difficulties; they even have to hire offices together. Bad debts still exist, which makes it difficult to make loan; opportunity to increase credit of this group is very little.
FDI sector is considered efficient in business. However, they are active in capital from the parent company abroad or leaning on foreign currency loans primarily in foreign banks.
The safe way is that surplus funds are put into government bonds. The balance of government bonds and local governments has been increasing in recent years. Particularly since the beginning of this year, the amount of credit institutions into bonds has risen to nearly VND60 trillion.
Second, business opportunities to generate greater cash flow when making credit loans of businesses and households are decreasing. Here, the answer is the stagnant product output.
According to the annual report of 2013 announced by the Vietnam Chamber of Commerce and Industry (VCCI), the majority of businesses assume that the biggest concern is to find output for products, especially under the context that the access capacity to market remains at a low level.
Meanwhile, the liquidity of the real estate market is weak while the majority of mortgage property is originally real estate. Therefore, many businesses in need of loans are not qualified due to weak financial situation, inability to prove the feasibility of the project and unclear and untransparent financial report. In addition, most assets have been mortgaged to secure obligations for existing loans and debts unpaid to date, thus there are no assets left to secure new loans. Many businesses cannot pay their debts due to budget arrears.
Third, bad debt settlement has achieved initial results. However, under the perspective supervision agency of the State Bank, if carefully calculated, bad debt including restructured balance under Decision 780 remains at about 9 percent.
According to Mr Hoe, in accordance with the faster speed and time required to unfreeze credit flow, this is also one of the causes which needs to be focused on.
Besides, Mr Hoe also mentioned that obstacle in recent time is the limitations in the provisions of the law which failed to protect the rights of creditors. Credit institutions are facing many difficulties handling collateral property since there remain unspecific provisions in many regulations of the law. There is no coordination between enforcement agencies and related agencies in the locality, which makes it difficult for credit organisations to handle bad debts and doubts increase when giving loans.
Fourth, credit organisations have become more focused on the management of credit risk and more cautious when lending. The issues of criminal responsibility and moral hazard of a large number of loans in the banks has partly posed psychological impact on extending loans, especially loans under cash flow (mortgage loan).
For these reasons, a lesson given by Mr Pham Xuan Hoe in his speech given at the conference is that: The rivers flowing together can help credit growth increase as well as ensure credit quality.
In the past time, average interest rate has been gradually returning low. However aggregate demand is not increased; restructuring of state-owned enterprises, especially equitisation remains sluggish; policies supporting small and medium enterprises have yet to be issued; the planning of large sample field linking the production chain of farmers to increase production efficiency in the country is still on paper.
"In other words, the banking industry does not generate credit flows itself. It is necessary that ministries, local authority and committees act aggressively to the rivers flowing," Mr Pham Xuan Hoe concluded.
Vietnamese
