VietNamNet Bridge – Believing that foreign invested enterprises (FIEs) are the potential borrowers, Vietnamese banks cannot approach the clients.

Hoang Van Thanh, Chief Accountant of CFT, a Japanese owned copper wire company, said CFT has borrowed capital from a Japanese bank at the interest rate of one percent per annum. Therefore, there is no reason for the company to borrow money from Vietnamese banks which always require much higher interest rates.

The representative of YKK, a 100 percent Japanese invested enterprise that makes garments materials, said the company only has to pay 0.5 percent per annum in interest rate for the foreign currency loan from the holding company.

Le Hoang Son, Director of the Bien Hoa Industrial Zone branch of Vietinbank, admitted that the bank fails to approach the foreign clients in Dong Nai province.

Most of the foreign invested enterprises borrow money from the banks designated by the holding companies. In other cases, enterprises only accept to borrow capital from Vietnamese banks if they can enjoy low interest rates. Meanwhile, Son said the low interest rates are unacceptable to the bank.

“We tried to contact a big German company some days ago. However, they said they have to borrow capital from Deustche Bank in Vietnam as requested by the holding company. They will only use our card service,” Son said.

VietinBank Bien Hoa now offers relatively low interest rates if compared with other Vietnamese banks, at 6-6.5 percent for dong loans and 3-3.5 percent for foreign currency loans. However, the interest rates are still not low enough for the foreign invested enterprises which want lower interest rates.

The representative from Dona New Tower said the Hong Kong and Shanghai Banking Corporation (HSBC) offers the interest rates much lower than that offered by Vietnamese banks.

She said that in order to be able to borrow capital at the interest rate of 3.5 percent from a Vietnamese bank, she would have to use many other services of the bank. Meanwhile, the bank does not commit to sell foreign currencies to her when she needs to buy foreign currencies to pay debts.

“The problem is that Vietnamese banks cannot compete with foreign banks because of the high interest rates. Meanwhile, interest rate is the first thing enterprises would consider before deciding whether to borrow money,” she said.

“Our holding company does not say exactly where we need to borrow money from. But it will raise a question if we have to pay overly high interest rates,” she added.

Though Vietnamese banks cannot access big foreign invested enterprises, they hesitate to lend money to small foreign invested enterprises after hearing that a lot of businesses’ owners have run away, leaving big unpaid debts.

Son of VietinBank Bien Hoa said the bank only approaches the enterprises with the investment capital of $10 million at least. “As for the smaller businesses, we only provide non-credit services,” he said.

KPMG, an auditing firm, in its report released in late August, showed that the outstanding loans of 33 domestic banks to foreign invested enterprises just accounted for 2 percent of the banks’ total outstanding loans.

The banks have the total assets accounting for 86 percent of the total assets of all the banks in Vietnam. Therefore, KPMG believes that the figure can truly reflect the market’s situation.

Chi Mai