Preferential interest rate stimulus for supporting industry

A stimulus for supporting industry

The proposed support policies include a number of new incentives for supporting industries such as support in domestic and foreign investment promotion activities, enabling domestic enterprises to become suppliers of multinational corporations, human resource training, research and development, technology application, renovation and transfer.

The short-term lending interest rate in Vietnamese dong for supporting industries is four percent a year - photo: VietinBank

Regarding investment capital, the MoIT proposed that an interest rate subsidy of three percent would be provided from the central budget through commercial banks for medium- and long-term loans in Vietnamese dong to invest in part-supplying projects. The duration of the credit support would be equal to the lending duration but not exceeding 10 years from the date of the signing of the loan contracts. The policy would be applicable to loans which would be signed and disbursed till the end of 2030.

The priority would be given to sectors including garment and textile, footwear, electronics, automobile production and assembly, mechanical engineering and high-tech support industry products.

More interest rate incentives for supporting industry enterprises are necessary

The moves are expected to create a stimulus to part-supplying enterprises to improve their competitiveness and participate in supply chains of corporations and FDI enterprises operating in Vietnam.

Banks join in developing supporting industry

According to the State Bank of Vietnam (SBV), developing supporting industry is one of the five prioritized sectors of the Government that would get capital allocation with lower interest rates than other fields. Currently, the maximum short-term loan interest rate in VND for some economic sectors is only four percent a year.

A representative of the Ho Chi Minh City’s Department of Industry and Trade said that the policy on preferential interest rates for investment in supporting industries in the coming years will focus on developing prioritized industries, including manufacturing products from prefabricated metal, electrical equipment, food processing, beverages, electronics - information technology, and more. The expected loan capital with interest rate support in the 2023-2027 period will be less than 85 percent for investment in equipment, technology and specialized software.

Nguyen Duc Lenh, Deputy Director of the SBV’s Ho Chi Minh City branch said that by the end of July 2023, the local banks had disbursed loans of over VND2.1 trillion to supporting industry enterprises.

Elsewhere, a representative of VietinBank’s Binh Duong province branch said that its preferential credit package of VND15 trillion for small- and medium-sized enterprises is showing good signs as many supporting industry enterprises are reporting quite high growth rates. In Dong Thap Province, as of the end of August 2023, the outstanding loan balance for five prioritized areas (including supporting industry) was about VND80.6 trillion, while that index in Binh Thuan Province accounted for over 70 percent of the total outstanding loans.

The above developments show that the supply of preferential credit for supporting industry businesses will continue to expand and become more abundant. Businesses will have more options to keep accessing low-interest loans from investment stimulus programs of some localities, or loans under the bank-enterprise connection program and specific preferential packages of credit institutions.