Deputy PM worries about thin cap of enterprises

16:40 | 22/08/2018 Finance - Banking

The Government pays a lot of attention to the health of market participants and the thin capitalisation status of enterprises, said Deputy Prime Minister Vuong Dinh Hue at the Vietnam Economic Forum (ViEF) 2018 held in Hanoi on August 21.

Deputy PM Vuong Dinh Hue speaking at the Vietnam Economic Forum 2018

Addressing the forum entitled "Expanding Vietnam's capital and finance market - Challenges and solutions", the Government official noted that by the end of 2016, only 47 pct of Vietnamese enterprises reported a profit, while 53 pct of them reported losses. He raised the question of whether their failure is due to a thin cap and a dependence on banks, resulting in a high cost of capital and declining profits.

In his opening speech, Deputy PM Hue said that the Government heeds the issues related to promoting enterprise development and improving the investment environment including removing institutional difficulties to boost the financial market.

He noted that many businesses rely too heavily on bank loans, resulting in high financial costs in addition to a number of other expenses such as logistics costs, trade costs, and market access costs that push operating costs to unsustainable levels.

The Deputy PM posed the question of what are the solutions to the problem of a thin cap according to international practices, and expressed his wish to listen to opinions from experts on this issue as well as other issues of the Vietnamese financial market.

"We must develop the market in the direction of modernization to international standards, especially the production of solutions to promote equitisation, divestment, market restructuring, finance and banking system, and the absorption capacity of market participants in the context of economic fluctuations," the Deputy PM said.

He noted that the Government also pays attention to the development of capital and financial market in the context of Industry 4.0, adding that the Prime Minister will preside over a national conference on this issue in the near future.

Theo NDO