Manila, Dec 27, 2006 AEST (ABN Newswire) - Asian Development Bank (ASX: ATB) has approved a concessional loan of $20 million for the second phase of a two-part project in Viet Nam to foster a business climate more conducive to the growth of small- and medium-sized enterprises (SMEs).
The health of the SME sector is considered vital to sustained economic growth and poverty reduction, given that they account for 86% of the country's total number of registered enterprises.
The traditional approach of assisting SMEs through provision of subsidized credit or services has achieved limited results.
The Small and Medium Enterprise Development Program is ADB's first policy loan in Viet Nam specifically designed to promote a conducive business climate by adopting market-friendly practices and eliminating policy bias against SMEs. The first phrase of the loan has achieved concrete results for the second phase to build on.
The first phase, backed by a $60 million ADB loan approved in 2004, supported improvement of the regulatory environment, development of an effective policy and institutional framework for SME development, improved access to financing, strengthened land use rights, and lowering of barriers that have limited SMEs' access to international markets.
The second phase is designed to continue these reforms to ensure an improved legal and regulatory structure, promote greater transparency and better governance, an enhanced policy structure, and a monitoring system.
"The benefits of the program will be increasingly felt as the existing systems are transformed and modernized to better support a progressively market-oriented economy," says Jin Cyhn, an ADB Economist and team leader for the project. "Its success will form the basis for greater private sector development in Viet Nam, which will provide a boost to all sectors of the economy, including the poor."
ADB's loan, from its Asian Development Fund, carries a 24-year term, including a grace period of eight years. Interest is charged at 1% per annum during the grace period and 1.5% per annum subsequently. Agence Francaise de Developpement of France and KfW Entwicklungsbank of Germany are proposing cofinancing for the second subprogram of Euro13 million and Euro6 million, respectively.
The Ministry of Planning and Investment will be executing agency for the second subprogram, which is planned to be undertaken between January 2007 and July 2008.
Contact
Floyd Whaley
Email: fwhaley@adb.org
Tel:+632 632 6848; Mobile: +63 920 938 6488
Graham Dwyer
Email: gdwyer@adb.org
Tel:+632 632 5253; Mobile: +63 920 938-6487
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