Businesses lack access to bank loans due to 2013 Land Law

Created 16 July 2015
  • PDF
Editor Choice
(0 votes, average 0 out of 5)

 Enterprises in industrial zones (IZs) say they cannot borrow money from banks because of provisions stipulated in the 2013 Land Law.

Vietnam, land law, mortgaged assets, bank loans

Hung Long Phuoc Company, specializing in making concrete components, has leased land in Hiep Phuoc IZ since 2006. 

Nguyen Thanh Mai, chair of Hung Long Phuoc, said the company received the land use rights in 2011 after paying land rent once, worth VND45 billion.

With land use rights as collateral, the company could borrow money from banks. 

However, some months ago, when the company contacted banks for more capital, it realized that the land use rights can no longer serve as the mortgage asset for loans as stipulated by the 2013 Land Law, which took effect on July 1, 2014.

Mai argued that if enterprises pay the IZ land rent, this means they have fulfilled their obligations, and therefore, they must have the right to use the land as collateral.

Also according to Mai, the land law and the decrees that guide the implementation of the law do not give detailed regulations on the issue. However, there is no regulation saying that it is prohibited.

Hung Long Phuoc is not alone. In the past, enterprises that lease land in IZs can mortgage the land use right certificate at banks for loans. 

But the 2013 Land Law prohibits this if IZ developers have not paid land rent they collected from enterprises for the State.

IZ developers said they want to pay land rent to the State, but they cannot.

Vuong Huu Man, general director of Hiep Phuoc IZ Development JSC, said not only Hung Long Phuoc, but most of the enterprises in the IZ, need capital and want to borrow loans mortgaged with the land use rights. 

Commercial banks also want to disburse loans at low interest rates for businesses to fund their plans to expand production.

“However, with the 2013 Land Law, disbursement is now stuck,” he said. 

“We wish to pay a land fee to the state at once, but we can only pay annually,” he said.

Not only Hiep Phuoc IZ, but many other IZs in the countries have complained about this. However, no decision has been released yet.

A senior executive of VietinBank said this was a problem because the bank cannot provide more capital to enterprises despite their good business performance.

Agribank also said it had lost many clients which are enterprises in IZs because the enterprises cannot mortgage land use rights for loans. 

The bank now has to check every case and discuss reasonable solutions with IZ management boards.

Source: DNSG/ VNN

Maybe You Also Interesting :

» Farmers’ loans cannot contravene lending principles

Assistant Professor Đinh Trọng Thịnh of the Hà Nội-based Finance Academy tells Nông thôn Ngày nay (Countryside Today) that removing the need for...

» Private SMEs tackled by inaccessibility to bank loans

Inaccessibility to bank loans is one of the main factors that has prevented private small and medium-sized businesses from further development, experts...

» SMEs hard to access bank loans

 Nearly 70 per cent of 2,600 surveyed small-and-medium sized enterprises (SMEs) had to seek loans on the black market as they were unable to access bank...

Popular News Categories:

- Asia & Asean  |  EU & Russia  |  America

- Facts  |  Urban  |  Faculty  |  Environment

- Business  |  Finance  |  Market Health

- Destination  |  Cuisine  |  Arts Music

- Cinema  |  Soccer  |  Sports  |  IT & Internet