Financial Times: Rescue companies by lower interest rates

11/30/2011

Sir, a lot of information that bank loans is increasing, the main reason because many companies cannot afford to repay debts, could you assessed this phenomenon?
I think the bad debt from banks appeared in 2008, when the first economic crisishappened. At that time, the government offered some solutions to reduce bank debt, not to resolve the debt fully. Continuing to 2010, the economy environment had been improved, many companies continued to borrow and invest in new projects. But the economic crisis in Euro and major export markets like USA, Japan (affected by earthquakes) has made the export of domestic firms become more difficult ...
I think this is generally difficult because the problem since 2008 have not fullyresolved. Secondly, Enterprises’ difficulty hasspilled over effect to the banks. Up to date, more than 40,800 companies have stopped paying taxes, stop business activity or bankruptcy. These data have evaluated the state of our economy is now more difficult. To handle this, measures need to be synchronized, rather than focus only one area that is difficult to changethe situation.

Could you explain why large firms have dissolved, bankrupt as this time. Is it true that capital of the company depends heavily on loans from banks?

Along with the world economic crisis and in the country, many companies have restructured since 2008 and they are not run by the fever of invest in real estate, securities, bank, finance ... also many experiencedbusiness every year, they make a small restructuring to concentrate on production. When there is a crisis, these companies have the ability to adjust capital and investment activities, so they remain stable. The enterprise is "dead" is the company run by market, and instant profit; without regard to risk management, not to restructure its equity and loan capital; not structure the portfolio and especially the staff ... so even a small crisis in the economic, those businesses would be affected immediately.

So what are thesynchronization measures we should take?
I think we need to lower interest rates. However, lowering interest rates must go hand in hand with protecting the interests of depositors, and also, to push inflation down. Make sure the values of people’s deposits are not depreciated. This is a measure needs the society and political system to work on.

As you said, to address and resolved difficulties of enterprises, inflation must be lowered. In contrast, to solve inflation depends on the efficient operation of businesses.So, to solve the root of "problem", where will we have to start from?

I think, hard fight of the economy is like in war, we cannot be a perfectionist! To success, there must be sacrifice. I think the State has to sacrifice growth; people have to sacrifice savings on interest earnings. Thus banks have chance tolower interest rates; businesses can survive to repay both principal and interest for bank and economic can growth again.

Photo: Mr. Phan Van Quy - member of National Assembly was speaking at the 2^nd session, National Assembly of course XIII

Recently, the Government has offered many solutions to support, share difficulties with enterprises as the exemption, reduction or rescheduling of tax for labour-intensive companies; together with a determined central bank cut interest rates... What’s your opinion on the government's solutions?

I think this is necessary solutions for businesses at this time. The reduction on taxes which the National Assembly has passed, the State Bank (SBV) has reduced interest rates down to 14%, now borrowing at about 18% that was an important factor. In the future, if possible, interest rate should continue to decrease. As I said just then, we may have to sacrifice the interest of depositors and possibly reduce the interest rate to the 10%, so enterprise can borrow at the interest of less than 15%, which help enterprise to survive through.
With strong measures of the SBV, I think, in addition to interest rate support, this is alsoan opportunity to restructure the banking system to see the strong and the weak, the merger consolidation of the financial system. Instead of ended up with many small ineffective bank which raise capital at high interest rates, enterprises would be the most severely affected.

Thank you!

Source: Financial Times

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