November 20, 2012

Vietnamese bank loans insufficient for fisheries industry

Vietnam's fisheries industry is still thirsty for capital despite loans provided by the State Bank of Vietnam to the aquaculture and seafood processing sector has increased by 11% in the first nine months of the year.

Tran Xuan Chau, Deputy Director of the Credit Department of the State Bank of Vietnam, said the outstanding loans to the fisheries sector had reached VND33,762 billion (US$1.6 billion) by September 30, an increase of 11.22% over 2011. The total outstanding loans to the sector have reached VND59,933 billion (US$2.9 billion) so far.

"The credit to the sector has been growing sharply recently," Chau said. However, while Chau affirmed that big capital has been pumped into the fisheries sector, farmers and seafood companies still keep complaining that they would get bankrupted because of the lack of capital.

Huynh Minh Doan, Vice Chair of the Southwest Steering Committee, said the problem is that the capital has not been used for the right purposes.

"Seafood companies borrowed money to expand production and boost exports. However, in fact, they threw money into real estate or stock investments. As a result, they incurred losses when the real estate and stock prices went down, while they still lack capital," Doan said.

Some years ago, local newspapers quoted experts as saying that catfish output was getting more than enough to satisfy the domestic demand. However, seafood companies still keep complaining that they lack materials for processing to fulfil export contracts.

"In fact, they just pleaded the thirst for capital to borrow money for their real estate and stock investment deals," Doan said.

While Tran Thien Hai, VASEP's Chair, complained that seafood companies cannot access bank loans at reasonable interest rates, Nguyen Tien Dong, Deputy General Director Agribank, affirmed that the bank has profuse capital and it is ready to disburse money for feasible projects.

Deputy General Director of Vietinbank Le Duc Tho also affirmed that the bank can satisfy the demand of all enterprises which can meet the bank's requirements.

Meanwhile, Doan said it would be better to check the loans provided before to enterprises. If necessary, banks should freeze the old loans to provide new loans to help revive enterprises, if banks can be sure that the borrowers use the capital for the right purposes.

"Banks, not local authorities, should keep a close watch over enterprises themselves, because local authorities would not be able to effectively supervise enterprises," Doan added.

A lot of measures have been taken to help the fisheries sector survive the current difficulties. However, the Vietnam Association of Seafood Exporters and Producers VASEP said enterprises would still face difficulties in 2013. A VASEP's report showed that in 2013, the materials Vietnam has to import for domestic processing would be 30% higher than that in 2012, worth US$65 million-70 million a month.

Meanwhile, the exports to the EU have been predicted to see a minus growth rate of 12-15%. The exports would find it difficult to penetrate the Japanese market because of the Ethorxyquin problem. It is estimated that the export turnover to the market would decrease by 1.5-2%.