Lending interest rate high in Vietnam

01-Nov-2018 Intellasia | Vietnamnet | 6:26 AM Print This Post

The developers of road projects under the BOT (build, operate, transfer) investment mode complain that lending interest rates are too high, up to 10.5 percent per annum.

By May this year, and after 20 years of implementation, 68 road projects had been developed under the BOT mode with total investment capital of VND208 trillion, according to a report.

Experts praised projects including the HCM City-Trung Luong, Long Thanh Dau Giay and Hanoi-Lao Cai highways which have eased traffic congestion and reduced transportation costs.

Lai Xuan Mon, secretary of the Cao Bang provincial party committee, said he hoped that Cao Bang would connect Lang Son with Dong Dang-Tra Linh highway, 144 kilometers long, and to be built under the BOT mode.

BOT is believed to be a good investment mode for infrastructure in the context of the state’s tight budget.

The project has support from the Party Committee’s Secretary general and prime minister. However, it will only be implemented after 2030. According to Mon, investors for the project have not been found.

Commenting about the difficulties implementing BOT projects, Mon said the main problem lies in the high lending interest rates set by commercial banks, up to 10.5 percent annum.

“Nowhere in the world is the interest rate as high as in Vietnam,” Mon said.

In Japan, farmers borrow money at a low interest rate as part of a policy on encouraging farmers to develop hi-tech agriculture.

In Vietnam, farmers have to pay 8 percent for preferential loans, while the interest rates for commercial loans are much higher.

Mon believes that a 5 percent interest rate would be reasonable.

Deputy chair of Deo Ca Group Tran Van The also complained that it is difficult to access bank loans. The problem is that Vietnam’s financial system is still small.

Under current laws, one enterprise can borrow no more than 15 percent of charter capital from one credit institution, or VND10-12 trillion on average only.

“There are numerous banks, but there are only a few financial institutions capable of providing loans to fund BOT projects,” The said.

He also complained that BOT project developers encounter difficulties because of changing policies. There are many conflicts between the Enterprise and Investment Laws.

He cited the Ministry of Finance’s Circular 166 released in 2011 stipulating interest rates for capital mobilisation as an example. After many amendments, the latest draft legal document seems to have the same provisions as seven years ago.

US$1=VND22,000

“By May this year, and after 20 years of implementation, 68 road projects had been developed under the BOT mode with total investment capital of VND208 trillion, according to a report.”

https://english.vietnamnet.vn/fms/business/210904/lending-interest-rate-high-in-vietnam.html

 


Category: Finance, Vietnam

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