Lending rate almost beyond enterprises’ reach: report

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC - Photo: Thu Nguyet

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.  

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.  

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.  

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.  

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.  

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.    

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.  

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.

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Lending rate almost beyond enterprises’ reach: report

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC - Photo: Thu Nguyet

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.  

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.  

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.  

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.  

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.  

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.    

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.  

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.

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Vietnam advised to join int’l trade convention

Speakers from Vietnam and overseas present the main contents of CISG - Photo: Quoc Hung

HCMC – Experts at a seminar on the Convention on Contracts for the International Sale of Goods (CISG) held in HCMC on Tuesday urged Vietnam to join the convention to assist local enterprises in global trade.

Trading between Vietnam and other countries will grow stronger while enterprises will have more convenience in international trade, especially small and medium enterprises (SMEs), they said at the seminar on “CISG –The Rule of Law”. The event was held by EPLegal Limited, VCCI and the Foreign Trade University with the support of EuroCham, CISG Advisory Council and United Nations Commission on International Trade Law (UNCITRAL).

With effect from January 1, 1988, CISG has become one of the most popular multilateral conventions on international trade with 74 member states including economic powers such as the U.S., France, Germany, Australia, and Japan.

Since Vietnam joined the WTO, international trading volumes of domestic firms have increased sharply. However, Vietnam has not ratified CISG, and most organizations and enterprises in Vietnam know next to nothing about this convention. This is a severe drawback since the well-known convention has already brought extensive benefits to enterprises of its contracting states.

During the seminar, speakers presented the main contents of CISG, its world-wide practices, the benefits to its member states and lessons for Vietnam. Researchers, lawyers, practitioners and enterprises also exchanged their views and experiences of CISG in member states and the issues Vietnamese enterprises should take into account when adopting CISG.

Matthias Duhn, executive director of the European Chamber of Commerce in Vietnam (Eurocham), believed that ratification of the CISG would be an important step for Vietnam, and help it further integrate into the world economy.

“If adopted in Vietnam, the CISG can help both the foreign and the Vietnamese business people to make sales of goods more efficient, and dispute resolution easier,” he said.

For Vietnamese business people in particular, application of the CISG can also help avoiding the risk of being forced into using a legal system that may be completely alien to their own. Therefore, “EuroCham believes that Vietnam’s adoption of the CISG will help making business faster, less expensive and more efficient for Vietnamese businesses and their foreign counterparts,” he said.

Professor Hiroo Sono of Hokkaido University in Japan also agreed with Matthias Duhn’s ideas about benefits for enterprises when Vietnam adopted CISG.

Once Vietnam becomes a signatory to the CISG, local enterprises could minimize the complication in disputes arising from contracts with foreign partners in regard of sale and purchase of goods.

In addition, Vietnam’s participation in CISG will reduce costs and time needed to negotiate the applicable law to contract; reduce the difficulty and cost which may incur due to the fact that the applicable law is the law of another country and avoid having to use the conflict rules of private international law to determine the applicable law to contracts.

Experts said that some 90% of Vietnamese enterprises are SMEs, so in the signing of sales contracts with foreign partners, they are often in a passive status as very few of them come to the legal consultant before conducting negotiations. As such, they only seek legal support from consultants once disputes arise.

So joining CISG will help reduce the risks, costs of doing business, and equality in contractual relations in regard of sale and purchase of goods.

Tony Nguyen, CISGVN advisor and general director of EP Legal, said that the seminar was an integral part of the campaign of lobbying Vietnam’s accession to CISG initiated by the CISGVN Study Group.

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