Prime Minister asks State Bank to explain 6 issues

Through the Working Group, Prime Minister Nguyen Xuan Phuc requested the State Bank to explain and provide solutions for 6 issues such as: Credit should not be allowed to "flow" to a few big tycoons; there should be solutions to mobilize USD resources from the people...

Minister and Head of the Government Office Mai Tien Dung, Head of the Prime Minister's Working Group, works with the State Bank of Vietnam. Photo: VGP/Nhat Bac

On July 18, Minister and Head of the Government Office Mai Tien Dung, Head of the Prime Minister's Working Group, led an inspection delegation to the State Bank of Vietnam (SBV) on the implementation of tasks assigned by the Government and the Prime Minister and solutions to contribute to ensuring the GDP growth target in 2017.

Speaking at the opening of the inspection session, Head of the Working Group Mai Tien Dung said: The Prime Minister assigned the Working Group to inspect ministries, agencies and localities on solutions to achieve the GDP growth target of 6.7% in 2017 in conditions with many advantages but also great challenges.

The State Bank is the 28th unit that the Working Group inspected and the 4th unit to be inspected and urged to achieve growth targets.

Credit should not "flow" to a few big guys

Through the Working Group, Prime Minister Nguyen Xuan Phuc conveyed 6 issues that the State Bank of Vietnam needs to explain and propose the best solutions. “We have done many things well, but some things need more comprehensive direction and stronger solutions,” said Head of the Working Group Mai Tien Dung.

The first issue is credit growth and interest rate reduction. This is a very important issue with the target of credit growth for the whole year from 18-20%. At the recent Government Conference with localities, the Prime Minister raised the issue of how this credit should not flow to a few "big guys" but should flow to start-up enterprises, production and business enterprises, that is, flow into investment in production, infrastructure, creating conditions to support enterprises. In 2016, the whole country had 110,000 newly established enterprises, in the first 6 months of the year there were approximately 60,000 new enterprises, but the number of enterprises stopping operations and closing down is also high due to reasons such as difficulties in accessing credit, land, policies, etc.

The Government meeting resolution assigned the State Bank to direct commercial banks to strive to reduce interest rates by 0.5-1%.

“According to rough calculations, Vietnam's credit balance is about 5 million billion VND. If the interest rate is reduced by 1%, businesses will save 50,000 billion VND. If we calculate 5 dong of capital and 1 dong of profit, we will have 10,000 billion VND. Corporate income tax alone is 2,000 billion VND and helps increase GDP by 0.25%. Or the current domestic public debt is about 1 million billion VND. If the interest rate is reduced by 1%, the budget will be saved about 10,000 billion VND,” said Minister Mai Tien Dung.

The second issue is dealing with bad debt. If we want to lower interest rates, we have to deal with bad debt, but it cannot be done overnight. The State Bank of Vietnam must have solutions to implement early and well the Resolution on handling bad debt passed by the National Assembly, ensuring the spirit of the Resolution, and providing specific guidance to credit institutions on selling collateral, selling bad debt, etc. "Without handling bad debt, we cannot lower interest rates," Group Leader Mai Tien Dung emphasized.

The third issue, Minister Mai Tien Dung said, was "repeatedly mentioned by the Prime Minister three times" that the State Bank is researching solutions to mobilize huge resources from the people. "How to mobilize the USD resources that are in the people's hands; instead of depositing them at 0% interest, how to mobilize this resource, and mix it with other resources for investment. The State Bank has a strong policy of fighting dollarization, but under controllable conditions, how can we mobilize this resource? We still have to buy international bonds with interest rates above 4%, so how can we mobilize them from the people?", Minister Mai Tien Dung said.

The fourth issue is cross-ownership. After the State Bank issued Circular 36, cross-ownership was better controlled, but not eliminated. For example, before Circular 36 took effect, Vietcombank owned 9.8% of MBB shares, 8.2% of Eximbank, 5.26% of SaigonBank and 4.6% of OCB, but up to now, Vietcombank still holds more than 7.16% of MBB shares, 8.19% of Eximbank, 5.07% of OCB and 4.3% of Saigonbank. It is necessary to continue to seriously implement Circular 36, this is a fundamental solution.

Fifth, the State Bank needs to continue to pay attention to a number of areas. Through contact, some enterprises are having difficulties with procedures related to assets on leased land. "The Governor calculates how to facilitate enterprises, even though the land is leased, how can assets on the land be mortgaged to borrow capital?", the Minister said. On the other hand, regarding Decree 67, in Khanh Hoa, there are 17/54 cases eligible for loans to build ships but banks do not lend, in Thanh Hoa there are also some cases. At the same time, pay attention to implementing the 100,000 billion VND credit package for high-tech agriculture, not using the budget, but the State Bank directs commercial banks to allocate this credit package with lower interest rates than usual.

Sixth, the Prime Minister noted that the State Bank must strengthen information security and safety for depositors. “We are encouraging people to use other forms instead of cash, so ensuring safety is very important, otherwise it will affect trust,” said Minister Mai Tien Dung.

According to Governor Le Minh Hung, these are all very important issues and in the coming time, the State Bank will give strong direction to implement them.

Appreciate the management of the State Bank

According to the Head of the Working Group, since the new Government was established, especially in the first 6 months of this year, the State Bank has seriously implemented the policies of the Party, National Assembly, and Government.

Since the beginning of 2016, the Government and the Prime Minister have assigned the State Bank 477 tasks, which is not a lot compared to other ministries and agencies, but the tasks are very important. To date, the State Bank has completed 397 tasks (359 tasks within the deadline and 38 tasks overdue). There are 80 tasks that have not been completed, including 75 tasks within the deadline and 5 tasks overdue. The Governor is requested to explain and report at the upcoming Government meeting.

Photo: VGP/Nhat Bac

According to the Head of the Working Group, in the first 6 months of the year, monetary policy management has been proactive, flexible and successful, reflected in stable interest rates and exchange rates, reasonable credit growth, and more attention paid to directing capital flows into production and business.

Specifically, inflation has been controlled, contributing to macroeconomic stability. Although GDP growth in the first 6 months only reached 5.73%, the macroeconomic indicators have been very good, many indicators have grown quite well compared to the same period in 2016. The lending interest rate level is more stable, at times slightly decreasing. The exchange rate is stable, especially the market confidence in the Vietnamese Dong, contributing to creating a stable business environment. Credit growth is quite good compared to the past 8 years, total means of payment increased by 6.28%, credit mobilization increased by 7.43% compared to the same period.

Regarding the growth target, the State Bank has had a strong solution to direct capital flows into production, business, startups, and infrastructure investment. The State Bank also advises the Government and the Prime Minister on restructuring credit institutions, handling bad debts, discipline, and system safety.

According to Chinhphu.vn