VietNamNet Bridge – Despite the successive interest rate reductions, the interest rates in Vietnam are still the highest in the region.

Vietnam’s interest rates higher than any others’

Under the latest decision by the State Bank of Vietnam, the ceiling lending interest rate applied to 5 priority business sectors is 11 percent per annum, commencing from March 26.

Commercial banks, which provide loans for businesses’ working capital or fund businesses’ production plans now require the interest rates of 12-15 percent. It is estimated that about 20 percent of the total outstanding loans still bear the old interest rates of 15 percent per annum. Only the consumer loans to fund individuals’ purchases of houses and cars bear the interest rates at over 15 percent.

Meanwhile, the latest report of the Chinese central bank showed that the businesses in the country can borrow money at the interest rates of 5-6.5 percent per annum.

Thai commercial banks reportedly apply the interest rates much lower than Vietnamese ones. Bangkok Bank, for example, provides loans at 7.3-8 percent per annum, HSBC, Deutsche Bank AG in Thailand 8.25 percent.

The Indonesian central bank has been keeping the fixed interest rate of 5.75 percent per annum over the last year. Meanwhile, Indonesian commercial banks now lend at 7 percent per annum on average.

Vietnam has been not only leading the regional countries in terms of the high interest rates, but has made records in the high frequency of the interest rate adjustments.

Since 2008, China has adjusted the deposit interest rates several times to keep the lending interest rate hovering around 5-7 percent per annum. Meanwhile, Vietnam has made tens of adjustments.

Economists have pointed out that other regional countries have been pursuing the policies which ensure the margin between the input and output interest rates at 2.5-3 percent per annum. Meanwhile, in Vietnam, the margin could be as high as 5-8 percent per annum, which can bring fat profits to banks.

Businesses have wings clipped because of high interest rates

According to Bui Kien Thanh, a well-known economist in Vietnam, the current US discount interest rate is just 0.1-0.25 percent, while the rate is 0-0.1 percent in Japan.

The US has set up its interest rate policy in a reasonable way to ensure that businesses can access long term loans at the interest rate of 5 percent per annum. Japanese businesses can borrow at the lower rates of 1-2 percent.

As such, the Vietnamese interest rates are 1.5-2 times higher than that in other regional countries, and 3-4 times higher than in other Asian developed countries and in Europe.

Thanh said that Vietnam has experienced a very hot development period with the credit growth rate of tens of percent per annum. This has pushed the inflation rate high up, which has led to the continued escalation of the interest rates.

He also said that Vietnamese commercial banks have been operating ineffectively due to the cumbersome apparatuses and high expenses. Therefore, they tend to charge high fees on businesses to offset the high expenses.

“I can say for sure that no business in the world can operate with such the high interest rates like in Vietnam,” Thanh said, adding that the high interest rates, which leads to the high production costs, have made it impossible for Vietnamese businesses to compete in the world market.

NCDT