The idea is one of the proposals which was recently made by the Ministry of Industry and Trade (MoIT) and submitted to the Prime Minister in order to remove hurdles that key businesses face when operating in sectors such as electronics, garment and textile, leather and footwear, wood, and car assembly.
In support of the proposals, Minister of Industry and Trade Tran Tuan Anh has emphazised the necessity of carrying out three basic solutions as a means of saving firms from going out of business in the near future.
They include promoting the clearance of imported raw and auxiliary materials in order to meet domestic production in a prompt manner, adopting incentive policies on credit, finance, and tax to help enterprises ensure their production activities and social security are maintained, in addition to looking for domestic and foreign consumption markets for vital industries that have a particular focus on key export markets.
To remove some of the challenges that industrial firms face, the MoIT believes that it is necessary to change the credit support mechanism because it is the area that the majority of businesses are in most need of support in.
Consequently, it is essential that stronger tools are applied when providing direct credit support to industrial enterprises, especially small and medium-sized enterprises (SMEs).
A major focus moving forward therefore is on using the refinancing tool that features appropriate discount rates for commercial banks so that they can lower the lending rates faced by industrial businesses, with the interest rate reduction being equal to 30% in comparison to the current 12 to 24 month interest rates.
Moreover procedures should be simplified to make it both transparent and easier for firms to access state credit support. Regarding the restructuring of the debt payment term for businesses, the MoIT has requested that the government consider adjusting the time scale in the event that the extended repayment period does not exceed 18 to 24 months.
It is evident that the complicated nature of developments caused by the COVID-19 epidemic are likely to continue to adversely affect businesses and production activities for the subsequent 6 to 2 months.
According to estimates released from a number of commercial banks, moderately-sized enterprises have seen domestic orders drop by between 40% and 60%, while some businesses that rely on orders from partners in the United States, Europe, and China have been forced to halt all operations. The conclusion of this difficult period will mean that firms will require plenty of time in order to restore normal production activities.
With regard to support packages, under the direction of the government, the State Bank of Vietnam (SBV) and credit institutions have been active in offering interest rate support packages, whilst also moving to reduce lending rates by between 0.5% to 1% in comparison to the previous agreement.
Despite this, the actual conditions for enjoying these credit packages remains extremely complicated with the reduction of interest rates remaining low and not really serving as leverage to boost development.
Therefore, the government and the SBV must work on providing greater incentives to support businesses by offering specific credit packages such as providing loans that feature low interest rates and extending the time which interest payments can be paid back in, Minister Tuan Anh noted.
In addition, for SMEs which are vulnerable to the negative impacts of the COVID-19 epidemic, the government should direct relevant agencies to consider exempting and reducing their corporate income tax while also giving them an extended deadline for tax payment, the MoIT representative added.