UNIVERSITY OF ECONOMICS
INSTITUTE OF SOCIAL STUDIES
HO CHI MINH CITY
THE HAGUE
VIETNAM
NETHERLANDS
VIE1NAM-NETHERLANDS
PROJECT FOR M.A ON DEVELOPMENT ECONOMICS
DETERMINANTS OF ABILITY GETTING BANK'S LOAN
CASE OF ENTERPRISES LOCATED IN IP & EPZ
IN HOCHIMINH CITY
A thesis submitted in partial fulfillment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS
BY
LAM CANH DUONG
BQ GIAO Dl)C VA fJAO T/·C> •
TRLIClNG E>H KINH TE TP .HCM
I
THU VI:¢N
(
bI Ab S"\)
l
Ho Chi Minh City, November 2007
Academic Supervisor:
Dr. VO THI QUY
CERTIFICATION
"I certificate that the thesis is my own research working. The data and result which
mentioned in the thesis are honest and have been not submitted for any degree"
Signature
Lam Canh Duong
ACKNOWLEDGMENT
I would like to express my appreciation to the following people who helped me to
achieve this thesis and without them; I could not get successful results.
First of all, I would like to thank the following individuals and organization for their
helpful supports.
Doctor Vo Thi Quy, the academic supervisor in the domain of learning, she,
who has spent much time in advising to this essay. Her ideas and comments
that helped my thesis much more clear and coherent.
I would like to thank, particularly, Doctor Nguyen Trong Hoai, who has
given me much valuable advices and necessary skills to orient and
consolidate my point of view so far during my statement this thesis.
I would like to thank to all Lecturers and Staff of Vietnam-Netherlands'
Project for Master on Development Economics, thank to this helpful
program, I have improved my knowledge as well as understanding a basic
development economics and a method of science studying which meet
international standard.
In addition, it seems appropriate to acknowledge all of my colleagues whose
have been so helpful during my studying course by their assistances,
encouragements and cooperation as well as sharing their hands during my
preparation ofthis composition.
Finally, I would like to thank all of my family members who have helped
and encouraged me much more since the beginning until achievement this
thesis.
ii
ABSTRACT
Credit capital is one of main resources of financing for Enterprises in developing
countries; Vietnam is going on the way of modernization and industrialization the
economy; the developing of Industrial Parks and Export-processing Zones role
important for the growth of the economy. Enterprises doing business in Industrial
Parks and Export-processing Zones have demand for banks' Loan, but there are
many factors that effect Enterprises' ability to borrow from banks. Base on
practically of Vietnam and data survey, this thesis investigates determinants of
ability getting banks' Loan case of Enterprise operating in Industrial Parks and
Export-processing Zones in Hochiminh City. It is figured out that besides collateral
as a decisive factor, two main factors distributing important role in the process of
applying and getting Loan are character and capacity of Enterprises. Thus, for
enterprise wishing to borrow from bank, they should improve their character and
capacity. In other hand, Banks that want to speed up sustainable developing in this
market, they should have attention on their credit policy that concentrate to explore
these conditions mentioned.
iii
TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION ......................................................... 1
1.1 Background .............................................................................. 1
1.2 Research question ....................................................................... 2
1.3 Scope of study ............................................................................ 3
1.4 Methodology .............................................................................. 3
1.5 The structure of thesis .................................................................. 4
CHAPTER II: THE SITUATION OF CREDIT ACTIVITY IN INDUSTRIAL
PARKS AND EXPORT PROCESSING ZONES IN HOCHIMINH CITY ...... 5
2.1 The process offorming and the role ofiPs & EPZs in Vietnam ............... 5
2.1.1 Type ofiPs in the world and in the region .................................. 5
2.1.2 Indispensable of development scheme IPs & EPZs in Vietnam ......... 7
2.2 Development situation of IPs & EPZs in HCM city .............................. 8
2.2.1 Historical of developing of IPs & EPZs in HCM city ..................... 8
2.2.2 The situation of activity of enterprise in IPs & EPZs ..................... 9
2.3 The role of credit to development ofiPs & EPZs ............................... 10
2.4 The situation of lending activity of bank for enterprise in IPs ................... 11
2.5 Summary of the chapter ................................................................................ 15
CHAPTER III: LITERATURE REVIEW ............................................ 17
3.1 Theory background .................................................................... 17
3.1.1 Concept of Credit. ............................................................... 17
3.1.2 Nature and functions of banking credit .................................... 17
3.1.3 Corporate Demand on Capital. ............................................... 19
3.1.4 Cost of using Debt ............................................................... 20
3.1.5 Asymmetric Information (AI) ................................................ 21
3.1.5.1 Lending with Adverse Selection ........................................... 22
3.1.6 Credit Rationing ................................................................. 23
3.1.7 Credit Rating ..................................................................... 24
3.1.8 Credit analysis and Loan decision ........................................... 25
3.2 Empirical study ........................................................................ 32
3.3 The Model ............................................................................... 34
CHAPTER IV: METHODOLOGY ................................................... 38
iv
4.1 The econometric design ............................................................... 38
4.2 The Conceptual design ............................................................... 40
4.3 Data collection method ............................................................... 42
4.4 Sampling method ...................................................................... 42
CHAPTER V: DATA PROCESSING AND EMPIRICAL RESULT ........... 45
5.1 Factoring ................................................................................. 45
5.1.1 Determine the number offactors ............................................ 45
5.1.2 Factor Rotation .................................................................. 47
5.1.3 Putting name and interpreting factors ..................................... 49
5.2 Regression ............................................................................... 51
5.2.1 Evaluating level of appropriate of regression model. .................... 52
5.2.2 Testing reliability of multiple linear regression model. ................. 52
5.2.3 Hypothesis testing ............................................................... 53
5.3 Statistical results ........................................................................ 54
5.3.1 Descriptive statistics ............................................................ 54
5.3.2 The reasons explaining enterprise's difficulty in obtaining Loans ....56
5.4 Summary this chapter ................................................................ 57
CHAPTER VI: CONCLUSION AND POLICY IMPLICATION ............... 59
6.1 Conclution ............................................................................... 59
6.2 Policy implication ...................................................................... 60
v
LIST OF TABLE
Table 2.1 The situation of lending and accumulated loan ............................. 11
Table 2.2 Loan accumulated and weigh ofloan in IPs, EPZs ........................ .12
Table 2.3 Market share and type ofbanks .............................................. .13
Table 3.1 :Credit rating ..................................................................... 24
Table 3.2 A Framework for finance statement analysis ................................ 27
Table 3.3 Types ofRatios ................................................................... 27
Table 3.4 Following explain the meaning ofvariales ................................. 36
Table 4.1 Distribution of population ..................................................... .43
Table 5.1 Total Variance Explained ....................................................... 46
Table 5.2 Component Matrix .............................................................. 47
Table 5.3 The map of hypothesis testing ................................................. 51
Table 5.4 Model Summary ........................................................................... 52
Table 5.5 ANOVA(c) .................................. , .................................... 53
Table 5.6 Coefficients(a) .................................................................. 53
Table 5.7 Coefficients(a) ofTwo models ............................................... 54
Table 5.8 (a)Type of Enterprise in descriptive statistic............................... 55
Table 5.8 (b) Scale ofbusiness ............................................................ 55
Table 5.8(c) Age ofbusiness .............................................................. 55
Table 5.8 (d) Main business line .......................................................... 56
Table 5.8 (e) Finacial gap (At present, gotten loan or not) ............................ 56
Table 5.9 Reasons explaining enterprise's difficulty in obtaining Loans ........... 57
vi
ABBREVIATION
AI Asymmetric information
AS Adverse selection
BOD Board of Director
CEO Chief Executive Officer
CFO Chief Financial Officer
CIC Credit Information Center
EPZs Export - Processing Zones
HCMC Ho Chi Minh City
HEPZA the HCMC Export Processing & Industrial Zone management unit
IPs Industrial Parks
MH Moral hazard
SME Small and Medium Enterprise
TC Total cost
VND Vietnam currency in Dong
% Percentage
vii
CHAPTER 1: INTRODUCTION
1.1 Background
In the recent years, the accumulate of Credit's accelerate in the Industrial Parks and
Export-Processing Zones in HCMC growth quickly; By the end of December 2005,
The Total amount was reached 15,203 billion VN dong, Increase 6.7 times compare
with year 2001. Growth rate of Credit simultaneously increasing of number of banks
take in part on Credit activities field are 52 units included: 21 commercial banks, 12
joint-stock banks, 3 joint - venture banks, 14 branch of foreign banks, 1 leasing
company, 1 joint stock leasing company.(The State Bank of Vietnam, 2005)
The increasing of amount of Credit as well as the distribution of banks show that the
potential and intendancy of investments gain effectiveness on growth of Enterprises
in industry Park and Processing Zone in HCMC, But , In order to approach the
banking finance is still problem for the case of Enterprises located in Industry Parks
and Export Processing Zones which caused by the conditions to apply for Loan: The
Small and Medium-sized enterprises that have just moved and established
the
business in the Industry Parks usually got the obstacles on ability of finance,
moreover, with the typical management followed the family tradition made the
business successful is not high. Therefore, it is really hard for Bank to valuate
finance capacity of companies that want to make long term investment:
As the aspect of competition, being the lack of information in Credit market, The
Domestic Banks have less advantage than the Foreign Bank in approach and supply
capital for Enterprises which attribute the foreign equity capital; Moreover, With tax
policy, and favorable tax (reducing tax for the new established business) affected to
psychology of intendancy in declare lost carried out in finance statement of
Enterprises, Those were distorted the project appraisal concerned with the bank loan;
For Enterprises, the property rights of using land or certificate of construction site
implemented slowly which impact on collateral, mortgage asset formed from the
Loan.
To solve the issues mentioned above, this study try to make clearly what factors
effect to ability of enterprise getting loan from bank in the case of enterprises located
in Industrial Parks and Export-processing Zones in HCMC.
1
Implementing the policy of Vietnam Gov, and the instructions of HCMC's People
Committee in developing IPs & EPZs to mobilization Internal and External resource
allocation, contributing for economic growth and social develop of HCM City
partially , and general speaking for the Country; At begin of 200 1, 11 IPs & EPZs
have been established including : 3 EPZs ( Tan Thuan, Linh Trung1, Ling Trung 2)
and 8 IPs ( Binh Chieu, Le Minh Xuan, Tan Binh , Tan Tao, Tan Thoi Hiep, NorthWest Cu Chi, Vinh Loc, Hiep Phuoc). Total Enterprises that given business licenses
are 492 , combine 257 Enterprises which have 1,121, millions US Foreign Capital
invest and 253 domestic enterprises which have 3,528 billion VND capital invested;
Almost of the infrastructure Company have large demand for capital loan,
approximately equal 860 billion VND, to complete infrastructure's category of
constructions , and facilitates public, and to expand the scale of IP & EPZs to service
Enterprise, Simultaneously, the HCMC's policy about moving the firms located in
residents areas (Those firms caused pollution in the City itself) enter IP & EPZs ,
making urgent required capital for Enterprise in equipment the new system machines
replacing the old system, upgrading management organization and scale of their
business.
The demands of Loan from Bank are very large , however, many of project meet
difficulties in approach to Loan which caused by obligating regulations from Bank;
with the history in business , the enterprise themselves can not using their trade
mark or prestige for borrowing via Credit mechanisms, It is hardly to apply for
procedures sufficiently to borrow or remittance as regulations; some of company are
still hesitate to contact with commercial banks ; otherwise, It is hardly to approach
other services of bank , because the services of bank in Vietnam have not developed
efficiency and popularly;
With theory related the asymmetric information, Bank itself prudentially consider
about risks management, to reducing risk, bank offer many conditions on contractual
loan. Intuition, there are many variables affect to ability of Enterprises borrowing
capital from bank, such as collateral, internal funds, firm size, contractual clauses,
and credit relationship between firms and banks etc .... , so, this paper is intend to
2
examine what determinants affected the probability of getting Loan by empirical
method.
Key word: HCMC- Ho Chi Minh City, VND- the currency of Vietnam, IPs & EPZs
-Industrial Park and Export Processing Zone; Probability to get Loan, determinant
factors.
1.2 Research question
Supplying loan for companies wishing borrow is a traditional credit task of Bank,
however, in order to contact with company, determinant those applications that have
sufficiency conditions to access loan, bank itself have make efforts; Since 2001,
bank have improved in marketing , evaluation, innovated the process of credit
operation quickly and efficiency. For Enterprises, as the demand side, they got so
many difficulties to borrow money from Bank. In case of enterprises located in
Industrial Parks and Export processing zones in HCMC, the emerge questions as
following:
(l)What are the advantages and disadvantages for enterprise working in IPs
and EPZs?
(2)What are the factors to affect to ability of enterprise in approach the
finance from banks?
(3)How the asymmetric information make difficulties for credit activity of
bank to company located in IPs and EPZs?
Enterprises need finance capital in operation and finance its growth, they can
seek for different resources of finance, but in the scope of this study, I would like to
concentrate in exploring Bank lending, because Bank lending is an importance
source of funding for firm by theoretically;
1.3 Scope of study
Banking credit play an important role to the economy in generally and the
development of Industry Park and Export Processing Zone partially; However,
enterprises that are basic component of the economy in Vietnam mainly are Small
and Medium enterprises, they are commonly constrained by finance and mainly
3
relied on bank source, especially for the case of enterprises in Industry Parks and
Export Processing Zones in the way of industrialize and modernize the country.
Study is only examine the limitation on credit problem in IPs & EPZs area in
HCMC, and analyze the situation of banking lending activity to suggest the solutions
for expanding the capacity of attraction capitals investment for the development of
enterprises in IPs & EPZs area in HCMC.
1.4 Methodology
The main purpose of this study is to identify what are determinants of ability of
Enterprises in IP & EPZs getting Loan from bank; the data collected by survey
which are used to run factor analysis and multi regressions analysis the determinants
affect and econometric model is applied for testing main hypothesis;
The study plan to employ of qualitative and quantitative analysis, this study will try
to give more of a quantitative-based explanation, rather than a qualitative
explanation.
Qualitative analysis that will describe Enterprises characteristics of business, finance
gap and analyze how factors such as collateral, relationship affect ability to borrow
from bank. Quantitative analysis will use finance data and SPSS software, thought
factor analysis function to analyze how finance variables affect the capacity getting
bank loan.
1.5 The structure of thesis:
The thesis includes six chapters. They are as follow:
Chapter 1 is the introduction of the problem statement, research questions,
objectives, and the scope of study;
Chapter 2 mentions the process of developing Industrial Parks and Exportprocessing Zones in HCMC, Credit activity in these areas, and demand for banks'
Loan need to push up and develop the main point sectors ofthe economy;
Chapter 3 provides conceptual, analytical frame work, and relevant theory back
ground, it is comprise of theory and empirical study in Vietnam and other countries.
The model research is suggested;
4
Chapter 4 present the methodology, it is going to present the reasons of picking up
the approach method suitable for Credit market in situation of Vietnam which face to
asymmetric information phenomenon. The econometric models is designed, data
sampling method apply for descriptive and econometric analysis;
Chapter 5 presents the data processing and the result of factor and regression
analysis;
Chapter 6 summaries the research result and suggests policy implication.
\
5
CHAPTER II: THE SITUATION OF CREDIT ACTIVITY IN INDUSTRIAL
PARKS AND EXPORT PROCESSING ZONES IN HOCHIMINH CITY
2.1 The process of forming and the role of IPs & EPZs in Vietnam
2.1.1 Type of IPs in the world and in the region
In the recent decades, many countries in the world, it is specially in the developing
countries in East -Asia, and North-East Asia have policy of opening the economy,
priority in attractive the investors both domestic and foreigner for producing the
export goods, strengthen the potential for the economy. One of many methods that
carried out in nations is reserved trading and producing zones ... operation following
specific statutes. In those areas which have different scale and names, for instant:
Industrial Parks, Export processing zones, the free economic zone or Special
economic zone (One of the earliest and the most famous Special Economic Zones
were founded by the government of the People's Republic of China under Deng
Xiaoping in the early 1980s. The most successful Special Economic Zone in China,
Shenzhenin). The IPs is type of free economic that has the characteristics of
Industry, including the type as following:
Export Processing zone: It is known that the areas concentrate producing, It is
included the especial enterprises producing the export goods, and execute the
services related to producing and export. EPZ is closed areas, it have finite boundary
and stand isolated. EPZs have got the favors regulations in many aspects, for instant:
import material, equipment, machinery, and export goods, especially in favor of
corporate tax, income tax. Besides, it is supplied infrastructure and advantages
conditions in order to create highly profit.
Industrial Park: It is the concentrate produce area, comprise of the company that
producing the industrial goods and doing services which serving for industrial
products, it also got the finite boundary and have no inhabitants. The export
enterprise can do their business in IPs. Companies in IPs produce goods for both
consuming of domestic market and for demand of export, Enterprise operation
business in IPs have favor regulations of EPZs and have favor statute serving for the
domestic company; The IP is more efficiency than EPZ in the aspects of (1) the
enhance capacity provided the domestic material, (2) enhance ability expanding the
6
domestic consumer goods market, (3) capacity of using worker, and wages
expenditure is lower than in EPZ.
The high technology area: Is known that the area produce goods and services which
have technology quality associated with practice producing and science study.
Compare to IP or EPZ, the high tech zone with the basic function of growing
products, trading the science and technology products, the mental high-tech and
sophisticated products. The high tech zone can be set up completely new or built on
the basic on IP, EPZ.
The especial economic zone (open economic zone): It is the form of free trading
economic with general characters. By the goal similarity IP, especial zone have
received the statute more freely and mobile, it is allowed for trading general
economic: services, agricultural, industrial, travel, finance, banking, study and apply
science, and can consume some domestic products following the principles oriented
simultaneously internal, external.
2.1.2 Indispensable of development scheme IPs & EPZs in Vietnam
Industrialization and Modernization for development, transformation from small
scale production to large scale production is issued which have common rule in the
developing countries. In order to have achievement, it is depend on condition and
situation of in each country which have its own method and solution to carry out the
process industrialization and modernization.
Establishing the IPs and EPZs is one of important solutions to push up rapidly the
process of industrialization and modernization because of:
IPs are places that attract the company producing industrial products, apply the
science achievements and modern industrial to operation and product activity,
Providing for economy export products and substituting the import products by
modern technology, means, method , to create large yield, labors capacity. It is
occupied an important position to develop and improve infrastructure system,
technology equipment system, resources system ... It is known that is the foundation
for the cause of industrialization and modernization.
It make the new structure that is attractive for investors, especially for foreign
investors, concurrently, constructing IPs ensure for organization, management
easily, it save more time and capital in constructing the infrastructure. Because
7
company is built at planning and IPs is equipped sufficiency infrastructure, the
investors will save more external expenditure.
Establishing and developing IPs is base role in the process of planning the new
urban, distributing in carry out the planning and development social- economic, It
make more conditions for domestic labor forces to take in part reasonable allocation
labor forces , applying the technology of production and modern management of
international. Therefore, IPs is the place that creates skill and specialize labor forces
providing for the cause oflndustrialization and modernization the country.
2.2 Development situation of IPs & EPZs in HCM city
2.2.1 Historical of developing ofiPs & EPZs in HCM city
After Law ofForeign Investment was issued and applied in 1987, the foreign capital
investment increase rapidly, but almost are concentrated in some of sphere of
services such as: hotel, building house for leases ... at Hanoi and HCMC, the foreign
investment in industrial, first and foremost in industrial of producing export goods
have two basic obstacles: the under developing infrastructure and the procedures
applying for license of invest or deploy project, it take more time. Base on
international experiences, the Vietnam Government have a policy to establish export
processing zone ( EPZ) for the new model economic with the aim of carrying out the
innovation policy, open the market to industrialize and modernize the economy
according to resolution of the assembly the sixth of Vietnam communist Party in
1986 taking the initiative.
The first of Industry zone in HCMC and Vietnam is the Tan Thuan EPZ, with the
begin scale 300 hectare according to license no245/GP of the State committee on
cooperation and investment issued on 24th of September, 1991. In order making the
favorable environment for attracting the foreign capital investment and operating the
new clear mechanism to satisfy practice demand of invertors, the regulations of EPZ
was issued including the Degree no 322/HDBT on 18th October, 1991, and the Tan
Thuan EPZ, the first EPZ was settled up by the decision no 394/CT on 25th
November, 1991 of Chairman of council of Ministry. Base on this decision, the
management unit of Tan Thuan EPZ was born; it was the first unit that called the
transaction name ofHEPZA (the HCMC Export Processing & Industrial Zone).
8
In 1995, the State committee on cooperation and investment permitted to establish
one more EPZ named Linh Trung EPZ, there are two EPZs in Ho Chi Minh City,
the Two first EPZs are the joint-venture Companies that join venture with foreign
doing their business on building infrastructure of EPZ. In 1996-1997, the series of
Industrial zones have been established in the districts ofHCMC: Tan Binh, Tan Tao,
Vinh Loc, Binh Chieu, Tan Thoi Hiep, Le Minh Xuan, Hiep Phuoc, Linh Trung2,
Cat Lai 4, Phong Phu, Cat Lai 2, and Tan Phu Trung.
Since October in 1996, the management unit officially became the HCMC Export
Processing & Industrial Zone, on 24th July 1997, Government promulgated decree
36/CP on regulation of IPs and EPZs substituting accompany a decree 192/CP on
28th December in 1994 and principle ofEPZs issued accompany a decree 322/HDBT
on 18th October 1991.
By the end of December 2005, there are 3 EPZs and 12 IPs in the HCMC area, with
the total areas licensed are 2,939.3 hectare and total areas pleased are 1,695.24
hectare.
2.2.2 The situation of activity of enterprise in IPs & EPZs
The IPs and EPZs after ten years operation have deployed clearing away space,
building infrastructures, changing over 1,000 hectare of total more than 2,000
hectare planned IPs and EPZs from agriculture lands which were less fertility
became industry lands which have enough power supply, water, road, and basic
services, project of environment protecting. In 2005, there are more 106 companies
in operation, increase the total number of enterprises in operation are 802, including
449 domestic enterprises and 353 enterprises which have foreign capital investment
by the capital register 1.026 billions US dollars over the area of 666.86
hectare.(HEPZA, 2005)
At present, on investment of development the IPs and EPZs infrastructure , there are
13 companies take in part with the total invest capital that carrying out are around
285.2 million US dollars in among of 529.3 million oftotal registration.
Total turnover of enterprises in IPs and EPZs reached to 2.27 billion US dollars in
year 2005; in which enterprises with FDI capital reached 1.62 billion US dollars,
increasing 31.57% compare with year 2004, domestic company contributed
9
10,067.47 billion Vietnam dong (around 649.51 million US dollars). The out put
from IPs and EPZs contributed 25.78% for GDP ofthe City.
By the end of 2002, there were 140 companies in operation in two EPZs which
attracting 78,377 workers of city and from other provinces, almost of workers are
young, the rate of woman worker occupied 75%, rate of worker come from rural are
50%. For the enterprises in IPs, the number of labor forces are more than 30,000
people working, and the number increase rapidly because there will more
manufactory to be built. In 2005, the recruitment labor for electric assembly
department, mechanics, garment, foods were 18,040 people which raise the total of
worker in 15 IPs and EPZs are 118,761 workers.
According to HEPZA (2006),Enterprises in IPs and EPZs executed good lines and
policcy, taxes regime and obligation of paying taxes. Rate of companies submit
declare paper and taxes report timely reached 95 to 98%. The taxes revenue
gradually increase annually.In year 2005, taxes revenue reached about 530 billion
dong, increasing 78.74% compare with year 2004.
2.3 The role of credit to development of IPs & EPZs
I
The models of IPs and EPZs are modern organization and management in doing
business with the goal of enhance the effectives of economics on the aspect of
saving infrastructure cost such as power supply, water, transportation, storage ... and
enhance the government management efficiency, protecting environment, Therefore,
in the process of development IPs, EPZs, banking credit play an important role, it is
explicit through:
The leverage role of credit: via credit bank can finance capital to producers in IPs,
EPZs with task of stimulate investment in many form such as: make loan, or make
finance contribution, buying stock or bill.
The credit capitals are resources which supplement for investment in building
infrastructure and are currency capital of enterprises in IPs, EPZs. In the case of
joint-venture Company that has foreign capital, banking credit is a guarantee,
supporting the domestic investors rising up ratio distribution capital to have the right
of management and operation the activities.
The banking credit also do some of guarantee services for company in IPs, EPZs
borrow capital from aboard by contract guarantee, submitting a tender, paying taxes,
10
issuing letter of credit, payment ensure ... to meet the demand of buying material,
consuming products at required of foreign market providing.
Through banking credit, companies can approach the resources of finance from
international organization to made more advantages for companies innovate the
produce technology mean while the limitation of domestic resources, Thus, it should
to be attractive the foreign capital for investment and development, moreover, the
role of banking credit is impact to the operation of enterprises in IPs and EPZs,
pushing up the capital's accumulation to invest, attracting the foreign capital.
2.4 The situation of lending activity of bank for enterprise in IPs
The activity of credit investment and developing services in IPs, EPZs are always
problems which commercial banks interesting to meet more and better demands of
both domestic and foreign companies. In last five years, activity of lending of
commercial bank in IPs, EPZs in HCMC have significant steps, total accumulate
loan increase quickly. By 31 December 2005, With 52 banks that join in this market,
the total accumulate loan were 16,598 billion VN dong, increasing 17.77% compare
to year 2004, and by 8.4 times compare with year 2001.
Table 2.1: The situation of lending and accumulated loan in IPs, EPZs, 2001 2005(by billion VN dong)
Year
Total amount of
Loan
2000
Accumulated Loan
Rate of Growth
of Loan
946
2001
4,911
1,975
108.77%
2002
10,154
4,207
113%
2003
14,867
8,189
94.62%
2004
25,294
14,094
72.12%
2005
28,501
16,598
17.76%
(Source: The State Bank of Vietnam, Branch in HCMC)
The activity of Credit in IPs, EPZs have the highly rate of growth both in the
turnover and accumulated Loan. The ways to make Loan are diversify, besides Loan
is made for investment and infrastructure companies, lending currency capital for
operation in producing, banks also carry out financial leasing for enterprises in IPs,
11
EPZs which have the required setting new line machine or renting equipped
instruments . At present, the total accumulate loan of financial leasing are 71 billions
VN dong, occupied 0.45% over the total of loan, weigh of accumulated loan of
companies in IPs, EPZs over total accumulated loan in HCMC are continually
increased, in 2001 the number are 3.5%, and increase to 9.75% in year 2005, the
peak of it is in year 2004 by the weigh at 10.32%. It is justified that demand for loan
of enterprises in IPs, EPZs more and more increasing to serve developing and
expanding scale of business of enterprises, and that is also distributed to rate of
economics growth in HCMC.
Table 2.2: Loan accumulated and weigh of loan in IPs, EPZs over total mount of
loan in HCMC (by billion VN dong)
Year
Total loan in IPs,
EPZs
Weigh of loan in IPs,
Total loan in HCMC
EPZs over total loan in
HCMC
2001
1,975
56,489
3.5%
2002
4,207
74,242
5.67%
2003
8,189
101,005
8.11%
2004
14,094
136,624
10.32%
2005
16,598
170,200
9.75%
(Source : The State Bank of Vietnam, Branch in HCMC)
Along with development of enterprises in IPs, EPZs by more than 802 projects, with
total amount of register capital beyond 2,247.18 million US dollars, these are
advantage economic environment for banks to expand their business in credit
investment and services. However, if we consider on market share of credit, the
joint-venture and branch of foreign banks are still get higher weigh in total loan
compare with domestic banks. In amount of 52 banks taking part in IPs, EPZs
market, there are 17 joint-venture and branch of foreign banks which reach 32.69%
over total number of banks jointed in IPs, EPZs, but the their market share or their
total loan reached 55.23% over loan in IPs, EPZs market.
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