Few takers for foreign currency loans

Monday, Jan 06, 2014 09:09

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by Compiled by Le Hung Vong

Unlike in past years when there was great demand from companies for foreign exchange to pay for imports, this year most do not want to borrow money, making it hard for banks to find customers.

Do Duy Thai, general director of Thep Viet Co., said normally steel producers increase imports of feedstock from early December to prepare for production in the next four months.

But the lower consumption of steel products in 2013 had led to high inventory levels, and as a result the demand for US dollar loans had fallen sharply, he said.

According to figures from the State Bank of Viet Nam's HCM City branch, as of December 25, foreign currency outstanding loans were worth VND160.74 trillion (US$7.6 billion), or 16.9 per cent of total bank loans.

It was much lower than the 22 per cent in 2012 and 27.08 per cent in 2011.

The SBV's Circular No 37 early last year on enterprises' foreign currency borrowing causes difficulties for exporters by requiring them to prove their capacity to repay.

With demand slumping many banks have slashed lending interest rates to 3-5 per cent.

VietinBank offers short-term loans at 3.5-5 per cent.

Eximbank, ACB, and Sacombank are charging 4-5.5 per cent for short-term loans.

Pham Hong Hai, deputy director of HSBC Viet Nam, said businesses were forced to use other bank services to get these loans.

But they can get dollar loans from foreign banks at 3-4 per cent without having to use their other services because they have access to cheap funds from their parents.

VinaCapital finds partner

There is good news for VinaCapital, the asset management firm which plans to develop the South Hoi An Resort in the central province of Quang Nam – it has managed to find a partner to replace Genting Berhad Malaysia in the US$4 billion integrated resort and casino project.

"It is a famous global player in the casino industry," VIR newspaper quoted a senior official of the Chu Lai Economic Zone as saying.

"It has good financial capacity and strong management experience, which makes it perfectly suited to run an integrated resort complex."

The official, who declined to be named, said it was not an appropriate time to reveal the name of the foreign partner, whom VinaCapital recently informed authorities about.

The identity would be revealed after the deal is approved by the Government, he said, adding it would be done in early 2014.

South Hoi An, which consists of five-star hotels, villas, and electronic gaming facilities, will become the largest tourism project in Quang Nam.

VIR said the new partner could pick up an 80 per cent stake in the project, with VinaCapital retaining the rest. Earlier VinaCapital held 80 per cent and Genting Malaysia Berhad, 20 per cent.

"The new partner's contribution of 80 per cent of the capital makes it (South Hoi An Resort project) more feasible," the official said.

He promised that Quang Nam authorities would co-operate with the investors to speed up development of the project.

The project was licensed in late 2010. But Genting suddenly announced its withdrawal in September 2012, forcing VinaCapital to look for another partner.

In August 2013 VinaCapital asked the Chu Lai Economic Zone to scale down the project and extend the time frame for its operation.

As a result, the resort is set to shrink to 1,000ha from 1,500ha, while the period of operation will last until 2035.

In the first stage, 500 guest rooms will be built and other tourist services developed on 23ha to the south of Cua Dai Bridge.

They will be ready in the fourth quarter of 2015.

Property firms hopeful

With the real estate market seemingly bottoming in 2013, property companies are hoping that their difficulties will end and trading volumes will rise this year.

Le Chi Hieu, general director of Thu Duc Housing Development Corporation (Thuduc House), said housing prices were more stable in 2013 and the number of transactions increased steadily every quarter.

He said price stability was seen in not only the low-cost housing segment but also medium and higher ones.

A recent market survey by Savills Viet Nam found that the number of transactions in 2013 was 45 per cent up year-on-year at some 5,700 apartments.

Truong An Duong, head of the consultancy's market research department, said the number of apartments sold in 2013 was much higher than in 2012, indicating buyers' confidence has increased.

Hieu said homebuyers now understand better the elements of housing prices.

"The property market will be more stable in 2014 but the market could depend on State policies," he said.

It is now a buyers' market, forcing sellers to make improvements, prepare better before investing, and offer reasonable prices, he added.

Le Hoang Chau, chairman of the HCM City Real Estate Association, said the market would remain difficult this year, but things would improve gradually as long as the Government's Resolution No 2 on removing difficulties for businesses and production, supporting the market, and handling bad debts, is carried out effectively.

Developers need to change their way of doing business and have to restructure their investments to choose products in demand from customers.

He called for disbursement of the central bank's VND30-trillion credit package for homebuyers and incomplete property projects.

Duong of Savills Viet Nam doesn't expect a sudden rise or fall in apartment prices in 2014.

More stable economic conditions and lower lending rates would be the factors that help boost transactions in the housing market, he explained.

Nguyen Van Duc, deputy chairman of the HCM City Real Estate Association and deputy director of property firm Dat Lanh Co., said the real-estate market was on the brink of collapse this year.

He said 60-70 per cent of property firms would collapse while 20-30 per cent would survive the hard time.

It would be difficult to "save" the property market, he said, adding that measures to rescue it should have been taken as early as 2011.

He dismissed the measures taken in 2013 as "ineffective," saying the market would only revive when the economy does. — VNS

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