Taxes and high interest rates! Perennial concern for Vietnam’s garment sector

by Apparel Resources News-Desk

31-August-2019  |  2 mins read

Taxes and high interest rates
Image Courtesy: e.vnexpress.net

While the world is talking about how much EVFTA and CPTPP could help industries in Vietnam grow, including apparel and textile sector, the less talked about but the much worrying concern for the industries, has been the rising taxes and interest rates.

There are many firms, which have not been able to make profits despite achieving their set targets and goals for the year – And this happens because of huge loans worth hundreds of billion of dong, for which these companies have to pay exorbitant  rates of interest. This is a concern every small and medium industry has been facing in Vietnam for quite some time now.

TNG Investment & Trade, one of Vietnam’s prominent private textile and apparel firms, is one such company to face this problem.

The company’s finance report in the first 5 months of the year showed that the total capital was VND3 trillion, including VND1.3 trillion worth short-term loans and finance leasing, and VND250 billion in long finance leasing. In such cases, companies end up making minimal or no profits.

However, since early July, some central banks have cut the interest rates. In fact State Bank of Vietnam, in its report, showed that the VND lending interest rate is 6 to 9 per cent for short-term loans, whereas it is 9 to 11 per cent for medium- and long-term loans.

Nguyen Hoang Hai, Vietnam Association of Financial Investors, said “If the rate of interest is cut to 5 per cent annually, then it will help businesses cut its capital cost by 50 per cent.

There isn’t a better time than now for banks to bring down the interest rates and help bolster the industry and thereby the economic growth.

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