"Swimming in the whirlpool" - requires strong stance from the financial market

Experts were discussing at the forum

Businesses and investors are "diving" to find opportunities

Speaking at the 2023 Vietnam Financial Advisor High-level Forum organized by Investment Newspaper in collaboration with the Vietnam Wealth Advisor Summit (VWAS) on August 8, Deputy Minister Tran Quoc Phuong predicted that in the last months of 2023 and throughout 2024, the Vietnamese economy would continue to encounter numerous difficulties and challenges, stemming from global and regionally unpredictable situations as well as internal constraints and challenges within the economy.

Experts believed that the current economic environment was akin to a "whirlpool," forcing investors and businesses to dive to seek opportunities. Nevertheless, opportunities are becoming scarcer and more expensive due to the increasing complexity and enigmatic variables.

Given these challenges, Phuong suggested that a holistic view of Vietnam's macroeconomic situation was necessary, especially concerning the financial and monetary markets, to devise solutions that can foster the development of these markets, support the financial-banking system, securities companies, the general business community, and overcome challenges, seize opportunities, and significantly contribute to accelerating and developing the economy.

Speaking about businesses’ difficulties, economic expert Nguyen Dinh Cung pointed out that despite numerous directions from the Prime Minister and the Government, practical reforms within the business environment haven't been sufficient to offset external challenges. In fact, some reforms have even introduced more risks, costs, and uncertainties.

Providing evidence, Nguyen Dinh Cung stated that regulations concerning fire safety standards have affected all sectors in the economy, resulting in extremely high compliance costs. Despite the National Assembly and the Government's intervention, these regulations remain unchanged. This not only causes frustration for domestic businesses but also for foreign-invested enterprises.

Economic expert Le Xuan Nghia discussed the challenges businesses had faced when borrowing from banks with high-interest rates. He gave an example of a solar power investment company that was borrowing from a major bank at an interest rate that, despite being reduced from 17% per annum to below 15% per annum, remained unreasonably high. This made it difficult for the business to balance its financial costs.

According to Nghia, during crises, many countries support businesses by reducing or postponing collateral asset requirements and only maintaining the requirement for the ability to repay debt. However, Vietnamese businesses are still required to provide collateral assets. For example, businesses exporting food to Europe, despite projecting their revenue to increase from VND10 billion in 2022 to VND20 billion this year, still have the same credit limit . This is because banks assess loan applications based on collateral assets and repayment capacity.

Nghia believed that one of the reasons for high-interest rates was that the banking sector is cautious due to exchange rate fluctuations. However, with the current exchange rate having many supportive factors, significant fluctuations are not expected. Stable exchange rates are necessary for stable and gradual recovery of the asset and securities markets. Moreover, the expert forecasted that many developed countries would halt interest rate hikes and reduce interest rates from the end of the next year, as inflation is decreasing faster than projected. This creates an opportunity for the State Bank of Vietnam to further lower interest rates and support businesses.

Removing difficulties for businesses and increasing openness for investment

From these issues, Phuong emphasized the importance of a strong financial, monetary, securities, and corporate bond market for Vietnam's economy to remain resilient and continue growing. This is necessary to help the business sector overcome challenges.

In this regard, Nguyen Anh Duong, Head of Comprehensive Research Department at the Central Institute for Economic Management (CIEM), suggested that stabilizing the macroeconomy and controlling inflation were important tasks. However, more attention should be given to addressing business difficulties.

Specifically, it is necessary to improve capital access and absorption capacity for businesses, improve the business environment, enhance labor productivity, and boldly introduce regulations for testing new economic models (fintech, circular economy). Additionally, effectively implementing the free trade agreements (FTAs) that Vietnam has signed, studying and negotiating upgrades for some ASEAN FTAs, and simplifying the certificate of origin (C/O) issuance procedures and innovating trade promotion activities are needed.

Especially, Duong noted the importance of attracting and efficiently utilizing foreign investments in the new context. This includes considering increasing foreign investor participation in certain sectors and regional linkages in attracting FDI.

Regarding finance, experts believed that in an investment environment that has established a new status quo, but not without challenges, businesses and investors need professional financial advisors to access modern and high-potential investment channels with high returns while reducing risks.