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Optimistic Signals for the Economy (16/8)
16/08/2011 - 12 Lượt xem
The Ministry of Industry and Trade's latest statistics show that industrial production in May increased 3.1 percent over April, that in June improved 4.6 percent compared to May and that in July is 6.1 percent more than June; in the first seven months of this year, retail sales and service revenue totaled VND1,065.8 trillion, up 22.3 percent from the same period of 2010, while export revenue came to US$56.46 billion (up 33.5 percent) and import value was US$58.1 billion (including US$47.3 billion worth of goods imported for production and consumer goods). The exchange rates between the Vietnamese dong and the US dollar applied by the banks and those on the black market are almost identical. Trust in the Vietnamese dong has improved.
Dr. Vo Tri Thanh from the Central Institute for Economic Management (CIEM) noted that although the above-mentioned numbers were optimistic signs, businesses are encountering many difficulties including increased input costs, capital shortages, high interest loan rates, and more. Trust in the Vietnamese dong may have increased again but it is not yet sustainable. A large number of individuals deposited their money in banks for short-term periods. Business difficulties such as increased goods prices created pressure on the Government's policies for macroeconomic stabilization and inflation control.
Dr. Le Xuan Nghia, the deputy chairman of the National Financial Supervision Committee, assessed that tighter monetary policy is weakening the operational capability of many businesses and that the committee's survey indicates that 100 production and export businesses have huge inventory levels and 130 businesses have bad balance sheet assets. This is why if the tightened monetary policy is continued it could lead to stagnation in production and gross domestic product (GDP) growth in the third and fourth quarter of this year could reach less than five percent. Businesses wanted to see cheaper bank interest loan rates. Yet, according to Dr. Nghia, the interest rates could decrease due to reductions in inter-banking and government bond interest rates, but interest rates subject to businesses cannot be strongly decreased.
Techcombank general director Nguyen Duc Vinh said that Techcombank is serving about 50,000 businesses (almost 10 percent of all businesses in Vietnam), only 7,800 of which are still keeping regular contact with the bank; this shows that 70 percent of the businesses are encountering difficulties; surveys indicate that capital source imbalances are the major problem; usually, an owner's capital accounts for 30-40 percent of all capital within a business and there are a number of cases where the owner's capital includes capital borrowed from outside sources; sixty percent of a company's capital is used for scattered businesses, mostly real estate businesses; as soon as the tightened monetary policy takes effect, 40 percent of the working capital must yield enough to cover interest on loans related to the other 60 percent of capital that is already invested in businesses that have not yet yielded a profit; hence businesses need to restructure their operational and capital structures.
Sharing Dr. Vo Tri Thanh's point of view, Vinh said that the worst period is over and that development indexes in recent months are optimistic signals for the economy. The optimistic signals are promoted with the Government's determination to bring Resolution 11 to life. He said that accessing capital could be easier, which would mean the number of customers transacting with the banks would probably increase, increasing individual deposits in banks and thereby helping banks ease insolvency worries, and this would help ease interest rates and tame inflation. Vinh said that it is time for the banks to review and restructure themselves and that they should focus on financing production projects and decrease investment in real estate and securities. The domestic market would be a solid foundation for the banks in the coming time, he said. Specifically, the banks should focus on financing important production and export projects related to rice, cashews, rubber, pepper, seafood, plastics, fertilizers, paper, animal feed, electronics, electric machinery and steel and processing industries that serve the domestic market.
In the last months of this year, Techcombank will develop specific financial solutions for individual industries, promptly satisfy business demands for capital, assist businesses to effectively use capital and take business opportunities, and continue providing businesses with foreign currency at a preferential interest rate./.
Source: VEN.
