VietNamNet Bridge – The Vietnam Development Bank’s preferential credit program offers loans to businesses investing in support industries, but it has yet to see one applicant.

The government, in an effort to develop support industries, has offered many investment incentives and provided preferential loans to enterprises in the sector.

Under the government’s Decision No 12, the industrial production of materials, parts, accessories and semi-products for manufacturers and assemblers, defined as support industries, are subject to the government’s preferential loans disbursed through VDB.

However, VDB has not received any proposal for loans under the program over the last three years.

Deputy general director of VDB Dao Dung Anh noted that enterprises lack capital to develop their projects, but do not intend to access VDB loans because they feel the application formalities are too burdensome.

Under current regulations, borrowers need to submit their investment projects to an inter-ministerial appraisal council which will consider the projects before reporting the projects to the Prime Minister. VDB will then disburse money for the projects if they are approved.

Anh said the council has considered only one project so far, but it was submitted by a foreign invested enterprise.

“Complicated procedures prove to be the thing that most discourages enterprises, most of which are of small and medium scale. No Vietnamese-invested project has been approved by the appraisal council,” Anh said.

Anh revealed that a draft legal document is being compiled by the Ministry of Industry and Trade (MOIT) which will replace Decision No 12 and will remove complicated formalities to help enterprises access preferential loans more easily.

However, analysts believe that the low disbursement rate of the the VDB credit package does not mean there is low capital demand from support industry enterprises. In fact, they need capital, but cannot meet requirements to access official credit sources.

MOIT has proposed that the government set up a support industries investment fund, which will receive, manage and use financial sources for support industry development.

The fund is expected to have VND2 trillion in the first three years of its operation.

Regarding the lending interest rate, MOIT believes that the enterprises should be allowed to enjoy preferential interest rates, which are no higher than 80 percent of commercial loans.

VDB and government-managed funds are not the only capital source for the enterprises in support industries. Some commercial banks have launched huge credit programs to fund the development of support industries.

TPBank, for example, has announced that it will launch the VND1 trillion credit package by the end of the year to fund the support industries development.

A businessman, while applauding the MOIT’s plan on a support industries investment fund, commented that several trillion dong would be hardly enough for the support industry development.

“To make phone covers to provide to Samsung Vietnam alone, businesses would need to invest $500 million in technologies,” he said.

VNE