HCMC introduces interest rate subsidies for priority projects

Deputy Director Nguyen Quang Thanh of HCMC Finance and Investment State-owned Co. (HFIC) first discussed the content of the newly released Decision No.42/2024/QD-UBND by the HCMC People’s Committee, effective as of July 29, 2024 and stipulating loan interest rate subsidies for priority projects for socio-economic growth.

Accordingly, a priority project belongs to one of these fields:

• High-tech and digital transformation initiatives
• Startups and innovation ventures
• Commerce and agricultural production services
• Healthcare, education, vocational training, culture, and sports
• Economic, technical, and environmental infrastructure projects
• Projects within four key industries: mechanics, electronics-information technology, pharmaceuticals-rubber-plastics, food processing, and supporting industries

As to the policy details, Deputy Director Thanh shared that depending on the project type, the loan interest rate subsidy can range from 50-100 percent of the total borrowed amount. At present, the maximum loan volume for one such project eligible to enjoy the subsidy is VND200 billion (US$7.93 million), excluding deductible value-added tax. The construction investment capital is supported up to 70 percent, while the technology and equipment one up to 85 percent.

Projects in the fields of healthcare, education, vocational training, culture, and sports invested by non-profit public-owned units in the city can particularly enjoy an interest rate support of 100 percent in both the construction and technology-equipment parts. In addition, projects for kindergartens and general education levels by these units can also receive that 100-percent support.

The subsidy period is capped at seven years from the date the project is approved by the HCMC People's Committee, and the initial loan disbursement is made by the HFIC.

The Deputy Director further introduced potential opportunities and driving forces for concerned businesses. He stressed that a 100-percent interest rate subsidy essentially means the city is providing interest-free loans to businesses for investment purposes. The seven-year loan term offers significant long-term support.

These are expected to enhance their own competitiveness since a reduction in loan interest rates is equal to more possibilities for them to invest in new manufacturing technologies and expand their market reach to areas that used to be impossible owing to disadvantageous product prices.

Other businesses in neighboring countries are usually able to access loan packages with extremely low interest rates of 0-5 percent from domestic financial organizations. Meanwhile, domestic enterprises have to endure a rate of 6-12 percent, which leads to their loss right at the beginning of the race. Therefore, this new policy is seen as a measure to boost the inner strength of Vietnamese businesses.

Answering the question whether administrative procedures could pose a barrier for businesses seeking to access these loans, Deputy Director Thanh shared that the municipal leaders have emphasized the importance of transparency, clarity, and efficiency in implementing this subsidy program. They have specifically instructed relevant agencies to avoid creating additional bureaucratic hurdles for project owners.

To further streamline the process, HFIC is currently developing a standardized application procedure, aiming at simplifying the process for businesses to determine if their projects qualify for subsidies and to facilitate the disbursement of funds.

The preliminary application process involves the following steps:

1. HFIC will assess whether a business's project is eligible for the interest rate subsidy.
2. Depending on the project's nature, businesses will submit their applications to either the HCMC Department of Science and Technology (for projects related to high technology, digital transformation, innovative startups, commerce, agriculture, healthcare, education, culture, and sports, or infrastructure), the HCMC Department of Industry and Trade (for projects in the four key industries: mechanics, electronics-IT, pharmaceuticals-rubber-plastics, food processing, and supporting industries), or other inter-agency committees established by the HCMC People's Committee.
3. The relevant department will submit the completed application to the HCMC People's Committee for approval of the subsidy rate.
4. Upon approval, HFIC will promptly disburse the funds.

To ensure that businesses are well-informed about the application process, HFIC is now actively collaborating with the municipal departments of Health, Industry and Trade, as well as the Management Board of Ho Chi Minh City Export Processing Zones and Industrial Parks (Hepza), and Saigon Hi-tech Park.

These agencies will be responsible for disseminating information and providing guidance to eligible businesses located on their sites on how to prepare their applications.