Vietnam Market Watch: Russian Relations, SME Loans, and Public Investments - Vietnam Briefing News
Vietnam, Russia Seek Greater Economic Ties
Government officials from Hanoi (Vietnam) and Moscow (Russia) are urging businesses from both countries to invest into both cities. This is especially after the upcoming enforcement of the Eurasian Economic Union (EAEU) trade agreement of which Russia is a member. Vietnamese officials have stated that they welcome all Russian businesses and would support them. Russian officials also responded that Moscow has a lot of potential for Vietnamese enterprises, particularly for Vietnam’s high quality goods. In addition, Moscow has been implementing infrastructure facilities and industrial parks to attract small and medium sized businesses with preferential tax rates. Officials also highlighted the fact that businesses should come into Moscow as it hosts the 2018 World Cup.
The Russian Chamber of Commerce and Industry (RCCI) wants to meet with Vietnamese officials to create plans for investment and trade in 2017. The developments come after the Hanoi Expo which was held on September 9, where around fifty Vietnamese companies showcased commodities such as bamboo, traditional toys, cosmetics, food and footwear products. The EAEU agreement will open up 175 million strong market for Vietnamese goods. Vietnam’s exports to Russia increased by 20 percent while imports rose by 48 percent in the first seven months of 2016. Bilateral trade is estimated to reach up to US$10 billion by 2020 thanks to the trade agreement.
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Cheaper loans for Small and Medium Size Businesses
The Ministry of Planning and Investment has introduced a financing arm called the Small and Medium Enterprise Development Fund (SMEDF) to allow small and medium enterprises (SMEs) to get access to cheap loans. Authorities said that while the fund was set up in 2013 it only came into effect now as the government was setting up the fund and establishing a workforce. The SMEDF has picked three banks, Vietcombank, BIDV and HD Bank to represent it and has just started receiving loan requests from SMEs.
SMEs can borrow up to US$1.3 million (VND 30 billion) with a maximum term of seven or ten years with an annual interest rate of 5.5 percent for a tenor of less than 12 months and 7 percent for medium and long tenors. In the future, finances are expected to come from the banks rather than the state budget. SMEDF has four lending programs for SMEs, the first is for SMEs with innovations, followed by SMEs in agricultural, forestry and seafood sectors, the third is SMEs in electronics and engineering sectors and lastly, SMEs in waste and water management activities.
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Government Needs More Funds for Public Investments in 2016-2020
Vietnam will require close to US$ 100 billion to fund public investment projects in 2016-2020 amid an increasingly tight state budget. As per the General Statistics Office (GSO), overspending stood at US$6.9 billion (VND 154.6 trillion) in the nine-month period. Vietnam used US$4.8 billion (VND 109.8 trillion) to pay foreign debts between January and September, which represents around 70.8 percent of the plan. By September, disbursements for basic construction projects had reached 51 percent of the full year estimate.
The Planning and Investment Ministry and the Finance Ministry have been urged to work together to tackle the budget deficient and use proceeds from lottery sales to finance transport, irrigation and other key projects. In addition, priority will be given to major projects such as North-South Expressway, coastal roads, border patrol roads and climate change among others.
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