Exporters will no longer be allowed to borrow bank loans in foreign currencies beginning next year, if the central bank does not extend a circular regulating the loans. (Photo: plo.vn)Hanoi (VNS/VNA) — Exporters will no longer beallowed to borrow bank loans in foreign currencies beginning next year, if theState Bank of Vietnam (SBV) does not extend a circular regulating the loans.
Under Circular 31/2016/TT-NHNN dated November 17, 2016, whichwill remain in effect until December 31 this year, commercial banks can provideshort-term loans in foreign currencies for export firms which need funds for productionand have turnovers in foreign currencies.
After receiving such loans, exportersmust immediately sell the amount of foreign currency borrowed to the lendinginstitutions, under the spot forex trading method, except in cases when theforeign currency will be used to make payments.
Thanks to this policy, exporters have an opportunity toborrow foreign currencies at low interest rates. Currently, lending interestrates for short-term US dollar loans are roughly 2.5-4 percent, while the ratefor short-term dong loans is some 7-9 percent.
The policy is aimed to support local exporters to increasetheir competitiveness and boost exports, in the context that their businessesand production still face difficulties. This is also among the Government’s incentivepolicies aimed to support and develop local enterprises until 2020, which wasapproved in Decree 35/NQ-CP issued in May 2016.
Previously, the policy had been extended several times tosupport local exporters.
While exporters are still waiting for movement from the SBV,SBV Deputy Governor Dao Minh Tu has recently said that the central bank hasmany times wanted to stop the policy, but has instead extended it to supportlocal firms.
He admitted that though some exporters should be givenpriority so they might take advantage of the policy, others whose turnover inforeign currencies is very modest, should not be still enjoying it, as this hasproven to be unfair.
In the short run, SBV, therefore, might stop the issuance offoreign currency loans for some unqualified firms, Tu revealed, adding that, inthe long run, the policy will end for all firms, and all firms must graduallyshift from borrowing to buying and selling foreign currencies.
However, in contrast to Tu’s opinion, the general director ofa commercial bank, who declined to be named, was concerned that unqualifiedfirms will try to use this loophole to take advantage of the policy. Therefore,the target of ensuring business fairness, as desired by the central bank, wouldbe impossible to achieve, he said.
Huynh Nhat Trung, director of an agricultural product exportcompany in the central province of Binh Thuan, said that local exporters stillhave to significantly depend on bank loans, in which the interest rate in dongis twice or even triple that of foreign currency, meaning it will be difficultto reduce interest costs without this policy. This will result in Vietnamesegoods being unlikely to compete with rivals in the region, he said.
Meanwhile, financial and banking expert Nguyen Tri Hieu proposedthat the central bank extend the policy for an additional one year to avoid thecountry’s exports operating at a disadvantage. He believes that the extensionwill not impact on the Government’s anti-dollarisation policy, as the nation’sforeign exchange is relatively stable. Besides, the banks’ disbursement offoreign currency loans is in dong, not the greenback.
To avoid unqualified firms from taking advantage of thepolicy, Hieu suggested that the central bank could fine-tune the regulation.For example, only firms with at least 50 percent of turnover in foreigncurrency be allowed to seek foreign currency loans.
Echoing Hieu, expert Can Van Luc proposed that to make thefinal decision on whether to extend the policy, the central bank should conducta survey among credit institutions and the business community about the loans.
The Government should pursue the anti-dollarisation policy,but should not do it at all costs, Luc said, adding that it should fightagainst the dollarisation but, at the same time, should still create favourableconditions to support firms, especially exporters.- VNA
Thanks to this policy, exporters have an opportunity toborrow foreign currencies at low interest rates. Currently, lending interestrates for short-term US dollar loans are roughly 2.5-4 percent, while the ratefor short-term dong loans is some 7-9 percent.
The policy is aimed to support local exporters to increasetheir competitiveness and boost exports, in the context that their businessesand production still face difficulties. This is also among the Government’s incentivepolicies aimed to support and develop local enterprises until 2020, which wasapproved in Decree 35/NQ-CP issued in May 2016.
Previously, the policy had been extended several times tosupport local exporters.
While exporters are still waiting for movement from the SBV,SBV Deputy Governor Dao Minh Tu has recently said that the central bank hasmany times wanted to stop the policy, but has instead extended it to supportlocal firms.
He admitted that though some exporters should be givenpriority so they might take advantage of the policy, others whose turnover inforeign currencies is very modest, should not be still enjoying it, as this hasproven to be unfair.
In the short run, SBV, therefore, might stop the issuance offoreign currency loans for some unqualified firms, Tu revealed, adding that, inthe long run, the policy will end for all firms, and all firms must graduallyshift from borrowing to buying and selling foreign currencies.
However, in contrast to Tu’s opinion, the general director ofa commercial bank, who declined to be named, was concerned that unqualifiedfirms will try to use this loophole to take advantage of the policy. Therefore,the target of ensuring business fairness, as desired by the central bank, wouldbe impossible to achieve, he said.
Huynh Nhat Trung, director of an agricultural product exportcompany in the central province of Binh Thuan, said that local exporters stillhave to significantly depend on bank loans, in which the interest rate in dongis twice or even triple that of foreign currency, meaning it will be difficultto reduce interest costs without this policy. This will result in Vietnamesegoods being unlikely to compete with rivals in the region, he said.
Meanwhile, financial and banking expert Nguyen Tri Hieu proposedthat the central bank extend the policy for an additional one year to avoid thecountry’s exports operating at a disadvantage. He believes that the extensionwill not impact on the Government’s anti-dollarisation policy, as the nation’sforeign exchange is relatively stable. Besides, the banks’ disbursement offoreign currency loans is in dong, not the greenback.
To avoid unqualified firms from taking advantage of thepolicy, Hieu suggested that the central bank could fine-tune the regulation.For example, only firms with at least 50 percent of turnover in foreigncurrency be allowed to seek foreign currency loans.
Echoing Hieu, expert Can Van Luc proposed that to make thefinal decision on whether to extend the policy, the central bank should conducta survey among credit institutions and the business community about the loans.
The Government should pursue the anti-dollarisation policy,but should not do it at all costs, Luc said, adding that it should fightagainst the dollarisation but, at the same time, should still create favourableconditions to support firms, especially exporters.- VNA
VNA
