"Hot topics" regarding loans, interest rates, and land lease prices...

(Baonghean)Following two dialogues between real estate businesses and provincial leaders to resolve issues related to taxes and credit, at yesterday's dialogue, many pressing issues surrounding lending interest rates, loan conditions, and land lease prices were raised, with businesses hoping for prompt resolution from the government and banks.

According to a report by the State Bank of Nghe An, as of July 31, 2011: Total mobilized capital in the area reached VND 38,838 billion, an increase of VND 5,825.5 billion (17.6%) compared to the beginning of the year. Total outstanding loans of credit institutions in the area reached VND 70,409 billion, an increase of VND 10,491 billion (17.5%) compared to the beginning of the year.

There are 3,940 businesses (enterprises) currently having credit relationships with banks (companies), accounting for 61%. Outstanding loans of businesses at credit institutions as of July 31, 2012: VND 36,625 billion, accounting for 52% of total outstanding loans. In July 2012: credit institutions assessed and reviewed loan customers, and based on that, adjusted repayment terms and extended loans for customers facing difficulties due to objective reasons. Regarding interest rates:

State-owned banks offer the highest short-term deposit interest rate at 9% per year, while commercial lending rates are commonly at 12%-13% per year. As of July 15, 2012, 11 state-owned commercial banks and 4 joint-stock commercial banks had immediately adjusted all loan interest rates to 15% or below.

However, at yesterday's dialogue conference, many businesses stated that accessing bank capital remains very difficult. Mr. Nguyen Van Hung, General Director of Nghe An Food Joint Stock Company, expressed his frustration: "This year, the export price of pineapple juice is very low, forcing the company to make efforts in purchasing pineapples and exporting to maintain business relationships. The company is currently facing difficulties with its previous debt to the Investment and Development Bank. Therefore, for many years, the company has been unable to borrow any bank capital. In recent years, the company has launched many new products such as passion fruit, which have been very effective. However, banks only focus on collateral, not on the business plan and performance. Resolution 13/CP prioritizes agriculture, but the company's agricultural projects are still facing significant challenges."

The director of Vinh Hoa Seed Company in Yen Thanh lamented: Currently, the company purchases the rights to high-quality seeds to serve farmers, guaranteeing the purchase of hundreds to thousands of tons of rice from farmers each year, creating an increasingly close link between the company and farmers. However, the company still cannot borrow capital from banks; when loans are granted, they only amount to 30 million VND. Meanwhile, guaranteeing the purchase of rice from farmers requires 6-7 billion VND per season. For the past 10 years, the Agricultural and Rural Development Bank has not provided any loans.

Unlike the concerns of the two aforementioned businesses, although granted loans, Mr. Trinh Ngoc Son, General Director of Nghe An Import-Export Trading Company, stated that: The company currently has outstanding debt of nearly 100 billion VND per year, but the interest rate is too high, at 14-15% per year. The difference between lending and deposit interest rates at banks is still 6%, which is excessively high. He requested that the State Bank of Vietnam inform him when the interest rate spread between loans and deposits will return to its previous low level (only 3-4%). ​​The company is also very frustrated with the implementation of Circular 20 of the inter-ministerial committee: Companies are required to convert their land titles. However, after two months of delay, the process is still incomplete, leaving them without collateral for bank loans.

Sharing the same frustration as Mr. Trinh Ngoc Son, Mr. Nguyen Tien Dung, Director of Toan My - Do Luong Joint Stock Company, stated: Businesses are currently mortgaging their entire assets to borrow capital for production investment, but the difference in lending interest rates between 15% and 9% remains significant. Furthermore, banks increase interest rates immediately when requested, but only reduce them much later when asked to do so…

Regarding land lease and site clearance issues, Mr. Nguyen Anh Tuan, Deputy Director of Nghe An Petroleum Corporation, suggested: The Corporation has a project to renovate the Quang Trung apartment complex and is focusing all resources on it, but some residents still disagree with the compensation amount, even though it is the highest amount issued by the Provincial People's Committee. In March 2012, the Provincial People's Committee adjusted the planning for the Quang Trung apartment complex. Therefore, the Vinh City People's Committee, the Compensation and Site Clearance Board, etc., are all on hold. The Provincial People's Committee needs a policy to ensure the project's progress. The project needs resettlement area for the current residents and a certain amount of land to build low-rise houses to compensate for the 380 billion VND already paid for resettlement. According to Resolution 34/CP on renovating dilapidated apartment complexes, preferential loans are available, so the Corporation requests preferential loans for the capital to build resettlement housing.

Furthermore, Dong Khoi-Quynh Luu Joint Stock Company, Nghe An Agricultural Products Import-Export Joint Stock Company, Nghe Tinh Port, etc., all submitted proposals regarding high land lease prices. Nghe Tinh Port Company Limited also requested the province to promptly implement the Cua Lo channel upgrade project, which has been approved by the Government, and to construct a sand barrier to limit siltation. Fishing boats and the fishing channel of Cua Lo fishermen are still occupying the Cua Lo Port pier, causing security and safety issues for maritime activities. They requested the Provincial People's Committee to direct Cua Lo Town to expedite the construction of a fishing wharf for fishermen to anchor. In March 2012, Vietnam Maritime Corporation will open an additional domestic container route at Cua Lo Port; they requested that conditions be created for Vinalines Container Shipping to load and unload goods at Cua Lo Port to increase port operation frequency and facilitate the transportation of goods for businesses.

One notable proposal came from Quynh Luu Ecotourism Company, whose director, Ms. Thanh Mai, stated: Quynh Luu is a major seafood fishing district, and the company acts as a buyer and processor for fishermen's products. However, for the past six months, her company, like many other businesses in the area, has been unable to sell a single fish due to a deadlock with China. The company earnestly hopes for local government assistance.

It can be said that, since the beginning of the year, this dialogue between provincial leaders and businesses has attracted the most participation and statements from businesses. Particularly with the participation (co-chairing) of Mr. Nguyen Dong Tien - Deputy Governor of the State Bank of Vietnam, businesses felt encouraged to speak openly about obstacles surrounding borrowing and investment in production development. Many businesses also raised concerns about the low price of minerals but high resource tax and export tax rates, which negatively impact business efficiency. At the conference, the Investment and Development Bank of Vietnam, Nghe An Branch, also requested the Provincial People's Committee to allocate further funding for completed and operational projects to support businesses that have borrowed capital for construction but are currently facing financial difficulties.

Regarding the difficulties faced by businesses, the Director of the Department of Construction, Mr. Hoang Trong Kim, responded to the issues raised by PetroVietnam Construction Joint Stock Company. He stated that the renovation of the Quang Trung apartment complex is an urgent matter. When adjusting the planning, the Department of Construction sent a letter to three investors providing guidance on the planning adjustments. To date, none of the investors have completed their revised planning proposals. In the near future, the Department of Construction will provide more specific guidance on roads, parking lots, etc., to facilitate the businesses' implementation. Ms. Hoang Thi Le Dung also addressed the compensation for land clearance in the Quang Trung apartment complex and the land lease prices for businesses.

Vice Chairman of the Provincial People's Committee Dinh Viet Hong; Deputy Director of the Department of Natural Resources and Environment Chu The Huyen; Director of the Nghe An Tax Department Nguyen Dinh Hoa; leaders of the Nghe An State Treasury and the Nghe An branch of the Agricultural Bank also provided explanations regarding the difficulties and obstacles faced by businesses.

The Deputy Governor of the State Bank of Vietnam highly appreciated the capital mobilization situation and credit growth in the area, and also requested a review of some recommendations from businesses in the area.

Comrade Ho Duc Phoc, Chairman of the Provincial People's Committee, on behalf of the Provincial People's Committee, received feedback from businesses, shared their difficulties, and stated that the last four months of 2012 and 2013 will still be very challenging. Businesses need to produce and conduct business based on market conditions, adapting to circumstances. Solidarity and mutual support are essential. In the past, many projects that the province has attracted investment have proven effective, such as the Hua Na Hydropower Plant and TH Milk, which have attracted dozens or hundreds of satellite businesses, creating many more jobs. The Provincial People's Committee requested that departments, agencies, and district leaders be more responsible, enthusiastic, and work together with businesses. Departments should not form too many inspection teams to audit businesses. Businesses that comply well with policies and environmental regulations should not be inspected frequently. Regarding the planning and implementation of real estate projects in the city: Market considerations are also necessary. The Provincial People's Committee requested the State Bank of Vietnam to direct banks to develop lending for social housing projects. Nghe An currently has 6 projects, but none have received loans. Given the difficulties in accessing capital, the State Bank of Vietnam also needs to direct commercial banks to ensure businesses can access funding.

Chairman of the Provincial People's Committee, Ho Duc Phoc, also acknowledged that there is currently no mechanism to support product consumption for businesses, especially seafood processing businesses. The Provincial People's Committee will study this issue and is directing efforts to resolve difficulties in the real estate market, issue land titles for individual plots, and reform administrative procedures. Land prices for 2013 will be recalculated to alleviate difficulties for businesses. Regarding bank loans: After this meeting, the State Bank of Vietnam in the province should set up a complaint box for businesses to report negative practices in loan applications, and the province should conduct surprise inspections.

Regarding the construction price adjustment proposed by Central Vietnam Construction Joint Stock Company, Comrade Ho Duc Phoc suggested that the investor and the company review the contract to determine if price adjustments are permissible. He noted that businesses are currently facing significant difficulties in securing work, leading to situations where projects are undertaken without careful consideration of funding sources and indiscriminate borrowing from banks, resulting in insolvency.

The dialogue provided a good opportunity for the State Bank of Vietnam to understand the implementation of credit policies. Despite efforts to reduce interest rates, businesses still face significant difficulties as banks primarily prioritize collateral requirements. This was also an opportunity for the Provincial People's Committee and relevant departments and levels to review the implementation and address difficulties for businesses as directed by the Government. Supporting businesses means seizing opportunities and working together to resolve specific problems for each business, not just providing general support. In 2012, the Provincial People's Committee considered resolving business difficulties a key priority and implemented many positive and effective solutions, from the timely allocation of investment capital and debt repayment arrangements to the rigorous implementation of tax exemptions, reductions, and extensions for businesses. Nearly 5,000 businesses benefited from tax exemptions, reductions, and extensions under government regulations during 2011 and 2012.

Chau Lan