High lending interest rates pose threat to economy

It's time to cut medium-term interest rates below 10% as businesses don't want and don’t dare to borrow money given such rates, said Le Tu Minh, chairman of IMG Investment JSC.

The difficulties facing the real estate market lie in three areas. The first is fighting land speculation. Many people buy land and wait for prices to go up, leaving that land redundant and in limbo.

Other countries use taxes to minimize speculation. For example, we have a project in Australia that we have to pay a 2% land tax for every year. Land prices are determined annually by the tax authorities independently. Every year, we have to pay $700,000-800,000 in land taxes until the project is implemented. This year, the local government decided to increase this tax rate to 4%, which is very high.

If Vietnam applies this policy, only those who really implement projects will dare to keep the land, and when holding the land, they must kick off the projects very quickly. This measure not only combats land speculation but also helps the Ministry of Finance collect a large source of revenue.

We recommend that the Land Law drafting board supplements and applies an initial 2% annual land tax rate and progressive rates when land plots are not used for business activities.

Secondly, we thank the State Bank of Vietnam for taking timely measures to stabilize the real estate market. However, interest rate hikes should be time-bound and quantitative.

It's time to cut medium-term lending rates below 10%. With rates higher than 10%, no economy can be healthy. Businesses don't want and don’t dare to borrow money and customers put money into other areas instead of real estate. The tallies at developed countries are only 3-5%. We should lower rates to around 8.5% like two years ago, so that Vietnam can continue to be an Asian dragon.

Measures should be taken to prevent or restrict real estate developers from joining banks and vice versa because businesses engaging in both fields mobilize social capital mainly for their own projects, resulting in little social effect.

Thirdly, it is necessary to remove legal obstacles and streamline administrative procedures. The current biggest difficulty facing real estate businesses is overlapping legal regulations. For the same problem or the same regulation, there are many interpretations. Competent authorities at all levels, especially local levels, do not or dare not implement these regulations.

In enterprises, we assign work with a deadline. Anyone who misses the deadline without an appropriate reason will be fined or have their roles changed. However, it is not the same for government officials when they do not fulfill their duties. We clearly understand that losses due to delays are greater than those from embezzlement.

I propose that there should be clear regulations on the responsibilities of authorities at all levels. The Ministry of Planning and Investment should allow Vietnamese enterprises to extend land lease terms or give them land use rights for 70 years so that industrial parks are attractive enough for tenants in line with legal regulations and helping increase local revenue.

* Speech at a dialogue between property developers and Prime Minister Pham Minh Chinh on August 3, 2023.