According to the Ministry of Planning and Investment, as of September 20 banking credit growth was only 11.02 per cent against a full-year target of 21 per cent.

It means to achieve the target, credit institutions have to lend another VND550 trillion (US$24.23 billion) in the three remaining months.

It means banks have to begin a race to pump in VND5 trillion ($220.26 million) a day on average.

This has sparked off certain questions: How can the economy absorb such a huge volume of money? Is it really necessary to achieve the 21 per cent credit growth rate?

Some analysts said that for the economy to absorb the huge money flows, the banking sector needs to cut loan interest rates. Lenders are now in a position to do so, they added.

In recent years, the State Bank of Viet Nam (SBV) has been closely monitoring the market, enabling it to adopt flexible policies to ensure there is enough liquidity in the banking sector.

It has devised many financial support packages to help lenders continue to utilise short-term deposits for long-term loans, which are in great demand.

This flexibility will continue to be a hallmark in the remaining months of the year to ensure liquidity and safety and stabilise deposit interest rates.

The central bank has persuaded credit institutions to reduce operating costs and improve efficiency to achieve a cut in loan interest rates.

Thus lending interest rates to priority sectors are now only 6-6.5 per cent for short-term loans, and 8-10.5 per cent for long-term loans.

The rates for non-priority borrowers are 6.8-9 per cent for short-term loans and 9.3-11 per cent for medium- and long-term loans.  

Analysts said the other factors that could impact loan interest rates are foreign exchange and inflation rates.

The dong has been strengthening against the dollar and inflation remains under control.

On November 1, though the central bank announced a daily VND/USD reference rate of VND22,468 per dollar – VND310 higher than the VND22,158 in January, the exchange rate at banks of VND22,750 was actually VND10 lower than the figure in January.

Banks can trade the dollar within a 3 per cent band above or below the reference rate.

Thus, in the last 10 months, the reference rate has been reduced by 1.5 per cent while the currency has actually strengthened in the market.

Meanwhile, Viet Nam’s foreign exchange reserves had reached a record $45 billion at the end of the third quarter,  up by $6 billion from the figure at the end of last year, meaning there are unlikely to be dollar liquidity alarms.     

And what about inflation?

The CPI is up 3.71 year-on-year in the last 10 months, the highest 10-month rate in the last three years. It is up 2.25 per cent from December 2016.

The Government targets keeping inflation this year at 4 per cent or less.

While some experts supported an infusion of more money into the economy, others disagreed.

They pointed out that prices are already forecast to rise because of certain factors like hardening food prices due to the impacts of a series of natural disasters that have been hitting the country and the increase in healthcare costs for people without health insurance cards since August 1.    

Therefore, the 21 per cent credit growth target should not be set in stone, they said.

In August, Prime Minister Nguyen Xuan Phuc called for ensuring 21 per cent credit growth to help achieve the economic growth target of 6.7 per cent this year.

However, according to the Viet Nam Institute for Economic and Policy Research, GDP growth in the third quarter was 7.46 per cent, an improvement of 0.27 percentage points from the second quarter, and the forecast is 7.12 per cent growth for the fourth quarter, which would take the full-year growth to 6.67 per cent.

This means the central bank need not push the banking sector into achieving the 21 per cent credit growth target since this would pose an inflationary threat and possibly increase non-performing loans in future, the critics said. 

Gov’t divestment, equitisation snail paced

Viet Nam’s sovereign fund, the State Capital Investment Corporation (SCIC), announced recently that it would divest a further 3.33 per cent State stake in the Viet Nam Dairy Products Joint Stock Company (Vinamilk) on November 10.

It would be its second such stake sale in Viet Nam’s biggest dairy firm after the first last December.

SCIC holds a 39.34 per cent stake in Vinamilk, equivalent to nearly 571 million shares.

On December 12 last year the SCIC tried to sell more than 130 million shares but successfully offloaded only 60 per cent of them.

Vinamilk is one of three huge companies in which the Government’s stakes have to be completely divested this year. The others are Sai Gon Alcohol-Beer-Beverage Joint Stock Company (Sabeco) and Ha Noi Alcohol-Beer-Beverage Joint Stock Company (Habeco).

The overhaul of SOEs in the last five years helped reduce the number of firms in which the State owns a stake, pull out of non-core businesses and increase the efficiency of the sector.

However, the restructuring has been very tardy, with the State still holding controlling stakes in many companies in many sectors, and the efficiency of SOEs remaining low, especially when compared to the resources at their disposal.

To address the issue, last December, the Prime Minister issued Decision 58/2016/QD-TTg, which says the Government will hold 100 per cent stakes in 103 SOEs, while 137 others will be equitised in 2016-20.

According to approved plans, the equitisation of 44 SOEs must be completed this year, 64 next year, 18 in 2019, and one in 2020.

However, only six SOEs were equitised in the first two quarters of the year, fetching the State VND3.466 trillion ($152.7 million).

But there are no other plans announced yet by the Ministry of Industry and Trade, which runs Habeco and Sabeco, to sell its stakes before December 1.

To speed up the divestment in the two companies, the Ministry of Finance proposed transferring the Government’s stakes in them to the SCIC, which manages State capital in various sectors.

The slow divestment and equitisation has also been evident in HCM City, the country’s biggest economic centre.

The city will have to equitise 39 SOEs this year, a majority of them utility companies. They include 26 subsidiary companies and 13 parent companies.

No SOEs have been equitised so far this year.

Some analysts blamed the slow State capital divestment and SOE equitisation to difficulties related to legal normative documents.

Most SOEs earmarked for divestment and equitisation this year are major ones and so have high values, large parcels of land or have major projects under development.

Because of this, authorised agencies require a lot of time just to arrive at their valuations, thus affecting the schedules for divestment and equitisation.

Another factor that has affected the divestment plans is some company bosses’ apprehension of the highly complex equitisation process and the attendant difficulties they could be entangled in.

Officials from the finance ministry’s corporate finance department however believe that the situation is set to improve soon since three measures have recently been applied to speed up the divestment-equitisation process: completion of market economy institutions, creation of more incentive policies to attract foreign investors, and publicity.

The market economy institutions have been created in a modern manner to ensure fair competition and transparency in various sectors.

The Prime Minister has assigned a Government working group and the finance ministry to inspect and speed up implementation of the task of perfecting the legal framework on equitisation and State capital divestment.

Since the Vietnamese stock market is small, it cannot absorb a large volume of supply hitting it at a time. Thus, investments from other countries such as Japan and Korea should be solicited.

Experts also stressed the need to create more favourable conditions for foreign investors to invest in equitised SOEs.

As for publicity, the progress made in equitisation should be regularly updated on the Government and finance ministry websites. — VNS