HCMC firms decry surging interest rates

By Vien Thong   February 17, 2023 | 08:00 pm PT
HCMC firms decry surging interest rates
Cash is handed over at a bank in Hanoi. Photo by VnExpress/Giang Huy
Companies in Ho Chi Minh City have denounced high interest rates they say are forcing them to transfer stakes to foreign firms and sell property to repay debts.

At a meeting with local businesses held by the Ho Chi Minh City People’s Committee on Friday, Do Phuoc Tong, president of the Ho Chi Minh City Mechanical - Electrical Enterprises Association, said some businesspeople had to sell their houses and personal property to repay company debts.

He said others were negotiating stakes transfers with foreign-invested enterprises to avoid defaulting on loans.

Association members are finding it extremely difficult to access bank loans due to excessive interest rates, he said.

According to Ly Kim Chi, president of the Food & Foodstuff Association of Ho Chi Minh City, most food producers have received plentiful orders and have performed well since the beginning of this year, but their profit margin is "extremely low" due to high interest rates amid increased input costs, including electricity and water.

"With the current lending interest rate of over 10% per year, it is very hard to survive and maintain operations, let alone to make profits," Chi said.

He said some big food firms with decades of experience have recently had to transfer stakes to foreign enterprises and investment funds just to survive.

"This is very alarming and worrying. No one wants to ‘sell themselves’ to other enterprises. We need a policy to assist us with interest rates in order to conduct business with peace of mind," she said.

Pham Van Viet, vice chairman of the Ho Chi Minh City Association of Garment, Textile, Embroidery & Knitting, said 46% of member enterprises are facing major difficulties, including a lack of cash flow.

In addition to high interest rates, commercial banks are currently offering unrealistic business support plans with lending conditions that are far too strict, according to Viet.

Nguyen Ngoc Hoa, president of the city’s Union of Business Associations, said businesses are extremely thirsty for capital and do not have enough money to pay debts and invest.

Meanwhile, the prevailing loan interest-support policy is not feasible and difficult to implement because some enterprises are concerned about paperwork and inspections, he said.

"Loan interest rates of above 10% are a big obstacle to business operations," Hoa argued.

Therefore, the union proposed that HCMC consider re-implementing a 20-year loan program designated for investment stimulus.

Nguyen Van Nen, Secretary of the Ho Chi Minh City Party Committee, said if the loan program is re-implemented, it would be necessary to create new mechanisms to make it more effective in the contemporary context.

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