Leasing industry looks for teamwork
Despite being in the pink of health, Vietnam’s leasing industry eyeing collective bargaining as a means to further increase its clout and is calling for the setting up of an industry association. “It is obvious that no industry can develop without internal cooperation regardless of how well each company in that sector performs,” said Nguyen Van Binh, director of the Industrial and Commercial Bank of Vietnam’s Leasing Co (Incombank VLC).
“We need an association to bring us together through which we can co-finance big projects which are out of reach for individual companies.”
Financial leasing involves long-and medium-term loans of machinery, equipment and other property. Vietnam currently has eight financial leasing companies (FLCs), five of which belong to state-owned commercial banks while the other three are foreign–invested.
The latest report from the state Bank, the government agency in charge of FLCs performing solidly with bad debts (debts due for more than 360 days) accounting for just over 3% of total debts. “This is within the 5% international standard prescribed for FLCs,” said Kieu Huu Dung, director of the state Bank’s banks and non-bank credit institutions department.
The average capital adequacy ratio (ratio of capital to total assets) of the FLCs stand at 17%-much higher than the prescribed minimum level of 85. Despite these flattering numbers, most of the FLCs want more. “We could have done even better if we had got more favourable conditions, especially with relation to the regulatory framework,” said Binh from Incombank VLC.
General director of the South Korean-invested Kexim Vietnam Leasing company, Hyun-Jong Noh, agreed with Binh. Noh said that setting up the association was an immediate task for the Vietnamese government while in the long run it should draw up more favourable measures for FLCs such as amending regulations regarding the seizure of leased assets, litigation and execution procedures, and import tax. “We request the government to give FLCs the rights to confiscate leased assets if lessees’ violate contracts, without having to go through a variety of agencies like the Ministry of Justice, Ministry of Police or Municipal People’s Committee,” Noh said. “This is common international practice and it will help us reclaim assets much faster.”
Noh also complained that litigation procedures in Vietnam were too cumbersome, making bad debt settlements even slower. “There are cases which took us more than two years to complete the formalities for taking assets into possession,” Noh said.
Noh said that this causes further complications as many assets depreciate over the course of time.
When asked about these issues, the state bank said that it would consider all of them with other ministries, with top priority being given to the right to seize lease assets without going to court.
“On the hand, this is an absolutely legitimate aspiration,” the SBV’s Dung said. “On the other, it is one of the conditions that the Asian Development Bank set for Vietnam to get the bank’s Financial Programme phase II loan. So I think we will have to finalise this matter very soon.”
Category: Finance
