The Ministry of Planning and Investment is seeking government approval to develop a fund to assist the small- and medium-sized enterprises (SME) to get through tough spots, a ministry official told Tuoi Tre.
Nguyen Trong Hieu, deputy head of the Enterprise Development Agency under the ministry, said that given the current exorbitant lending interest rates, many SMEs are on the brink of bankruptcy, let alone making profits.
The private economic sector has to spend VVN220 trillion (US$10.56 billion) annually on paying interest from bank loans, while their total post-tax profits are only VND25 trillion, Hieu said, citing statistics from the Ministry of Finance.
“It is obvious that businesses operate mainly to feed the banks,” he said.
Hieu said that with what is said to be the world’s highest lending interest rate of 20 percent a year, many SMEs will be driven to insolvency should the rate remain uncut.
Earlier, the government had green-lighted a corporate income tax deferral for SMEs and labor-intensive businesses, in a bid to help them in these hard economic times.
Though speaking highly of this government aid, Hieu said it was not of great help to those in need.
“Businesses have to borrow bank loans worth VND1,100 trillion annually, but the deferred amount of taxes in the whole of 2011 was only worth VND9.46 trillion,” Hieu said, citing figures from the finance ministry.
Thus, Hieu urged the Ministry of Finance and other relevant authorities to propose stronger assistance, such as a value added tax exemption for SMEs.
“Corporate income tax deferrals or cuts will not help SMEs much at a time when they cannot access bank loans, while interest rates are still high.”
Hieu said the Ministry of Planning and Investment has developed a plan for the SME Development Fund, and is waiting for the government’s go-ahead.
The fund is expected to be instituted this year, and is intended to provide loans to SMEs with preferential interest rates of only 80 percent that of the rates charged on the market, Hieu elaborated.
It will target SMEs with effective operations, and those operating in the supporting industries, most importantly the agricultural production and exporting sectors, he said.
“We have proposed that the government provide the initial capital, worth around VND3 to 5 trillion for the fund, while in the longer term, it will be capitalized by foreign development assistance funds,” he said.
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