The capital city of Hanoi will support cost-investment interest rates for medium and long term loans (from one year and longer) in Vietnamese dong for enterprises headquartered in the city.

The city will pay 0.2 percent of the interest on loans (equal to 2.4 percent per year) for a 12 month period.
The loans should be invested in new projects, expanding existing projects and technological innovation.

Eligible enterprises must operate in the fields of manufacturing key industrial products, farming, processing farm products and foodstuffs or producing alternative products for imported goods with sales of at least 100 billion VND in 2012 and have over 200 employees.

Despite strenuous efforts by the State Bank of Vietnam (SBV) to adjust loan interest rates, they are still too high for most businesses.

Short-term loans with an annual interest rate of 11 percent are given only to businesses operating in five prioritised fields, while all other companies pay interest of 12-15 percent. Interest rates for individuals looking to buy houses or cars hover around 15 percent.

Experts said that high interest rates increased production costs and rendered domestic products less competitive than their foreign rivals.

President of the Small-and Medium-Sized Enterprises Association Cao Si Kiem said that domestic businesses were unable to pay high interest rates on bank loans.

This was why products imported from Thailand and China were often cheaper than domestic products, he stressed.

Kiem insisted that interest rates should be lowered to help businesses access more capital and stand firm on their home turf.

The Government recently asked the SBV to reduce credit rates, accelerate the monitoring of commercial banks, simplify borrowing procedures, give priority to the agricultural and rural sector, stabilise exchange rates and control the value of the Vietnamese dong more strictly.-VNA