Ha Noi (VNA) – Enterprises in the construction, steel, garment and shipbuilding sectors face significant obstacles with key interest rates on (bank) loans climbing from 12 percent a year to between 14-15 percent.
Le Quoc An, chairman of Viet Nam Textile and Garment Association (Vitas), said clothing exporters are confronted by an unforgiving exchange rate risk when converting their US dollar earnings into the domestic currency. The increasing cost of materials and labour has only worsened their plight.
“Borrowing rates of 15 percent a year do not encourage investment,” he said.
This year, total investment in the garment sector is estimated to reach 16 trillion VND (1 billion USD), 70 percent of which comes from loans.
“With a three percentage point increase in lending rates, the garment sector is set to lose 336 billion VND this year,” An said.
The industry fears it will be subject to even higher interest rates in the time ahead, he said.
Phu An Shipbuilding and Water Transport Joint Stock Company plans to inject a total of 300 billion VND (18.75 million USD) into its projects this year. The company, however, faces the challenge of limited capital due to rising interest rates.
Tran Van Hiep, the company’s director, said in light of the current situation, an enterprise should play it safe and look into adjusting its plans for investment.
Vu Duc Nhuan, general director of the Maritime Commercial Joint Stock Bank, said an increase in interest rates will impact small and medium-sized enterprises in particular.
Kieu Huu Dung, a banking expert, said enterprises should carefully consider just where they invest their money. “They need to exercise caution with sectors that have low capital liquidity such as real estate,” Dung said.
In an attempt to remedy the situation, clothing makers prefer to borrow in US dollars rather than Vietnamese dong.
Nevertheless, there is an element of risk involved as long-term loans often suffer at the hands of a fluctuating exchange rate.
Against the backdrop of inflationary pressure, small and medium-sized enterprises must come up with ways to alleviate the effects of rising interest rates.-Enditem
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