Does the unsecured loan create the power to the Vietnamese enterprises?
Pacific Corporation attends the general contractor for Vinh Tan 4 thermal power plant project
Reporter: Dear Sir, the lending interest rate is strongly decreasing in comparison with a few years ago, the banks want also to boost the credit. However, many companies said that they were still very difficult to approach bank loans. So which is the main problems?
Mr. Phan Van Quy: There are many reasons, but I think that one of the biggest obstacles is the legal constraints for the bank managers and loan procedures. Late last year, the Prime Minister guided and the State Bank’s Governor required to promote unsecured loan. However, some existing provisions in the laws such as: criminal law, criminal procedure law are “retaining” the bankers. For a long time, we used to provide loans on mortgage, now if the unsecured loan has any problem, the lending decision maker is very entangled in criminal offense. This is a problem I've repeatedly mentioned at the economic forums, and hopefully will be overcome when the National Assembly discusses numerous amendments of the Criminal Law.
Reporter: But if "untieing", strengthening the unsecured loan are not careful, it also easily results in bad debt, loss or improper use of funds?
Mr. Phan Van Quy: Of course, along with the removal of obstacles, the unsecured loan must be associated to strict, proper management. Not every mortgage means no bad debt, the importance is the currency effectiveness. The bank will consider to provide loan with the enterprise’s prestige, project feasibility. The bank must also innovate the management method under cash flow, this means that money coming to the project is only released to the suppliers, not directly transferred...
For example, previously, we have worked with a Korean company, they borrowed money from the bank of Korea. The bank sent the participants into the project operation, when having the need to spend money, the bank’s representative will review and transfer directly to the party B. The apparatus perating expenses are also determined as % under the international practices, and transfer as scheduled, so it was very strict, can not take advantage of use for the wrong purpose.
If the parties do seriously, properly, surely they will find a common voice. Initially, it may be unfamiliar, but then in the circulation, it shall be very reasonable, effective.
Reporter: But, the working way as you have mentioned is often suitable to the large enterprises, major projects, it seems inappropriate if applicable to the small enterprises, is the management apparatus not professional?
Mr. Phan Van Quy: This will have a chain effect, if the large capital flow runs, the small capital flow is also unfrozen. For many years, we often talk about the support to the small and medium enterprises, not to talk much about the large enterprises. They are the locomotives, making large projects, from that, the subcontract bid packages will be implemented by the small enterprises. With large plants, the auxiliary industry is supplied by the small enterprises.
For the small enterprises, it is very difficult to do a project. But for the large enterprises, this is easier because they have experiences, reputation, professional apparatus. So the major projects create jobs to the small enterprises, many workers.
For a long time, the state enterprises have been often entitled to obtain unsecured loan, and but the private ones must have collaterals. But for large private enterprises, they have accumulated experiences, reputation constructed for many years, it is not easy for them to lose their brand. Long since, many enterprises have lived by their own capital, or used collaterals to have investment money, so only developped to a certain level and then stopped. For stronger development, they need large capital.
Reporter: So, according to him, to boost credit, promote economic development, should the funding be directed to large enterprises, particularly large private enterprises?
Mr. Phan Van Quy: As my idea, our economy has many development opportunities, especially when the state is calling social capital, investment in infrastructure. If the domestic enterprises are slow, the FDI ones with abundant capital source will take this opportunity. We also make joint venture with foreign partners to invest.
I know there are large enterprises to borrow from the foreign funds with interest rate 3 times the domestic interest rate. They do not need a mortgage but assess by reputation, projects and they provide loans with high interest rate. Meanwhile, our banks have surplus money but can not provide loans. Some small and medium enterprises may borrow 1.2 billion VND but large ones borrow hundreds of billion VND, the pervasive effect will be many times larger.
Naturally, this may initially is not very familiar to a number of banks, but this is very popular under the international practices, we can fully apply it. Meanwhile, the bank restructuring is also pushed, the enterprises will be less difficult and grow more strongly.
Reporter: Thank you very much./.
Hoang Yen (Financial Times)