The cries of the Pasakha steel factories for rescue after the Wall Street crisis hit them with mounting losses has prompted the minister of economic affairs Lyonpo Khandu Wangchuk to drive down south this week to assess the situation for himself.
The steel factory owners are seeing this as indicative of the government’s willingness to help. But the minister has not given away anything yet, only that they submit a “report” to the government. The owners says that they are in desperate need of working capital as theirs had been spent on raw material and the returns had dwindled because of the world financial crisis, which sucked the money from the market. In other words, there was a credit crunch.
“The problem of working capital, if not solved sooner, can lead to a shutdown of the industries,” said an industrialist at a meeting with Lyonpo Khandu Wangchuk. In terms of employment and revenue to the national exchequer, which steel owners say they help generate, the success of the industries and the investors was important and that, at the moment, working capital was integral to their survival.
“Our proposal is that we want the government to talk with the financial institutions to consider bridge loans,” said Letho, the secretary general of the association of Bhutanese industries.
According to the owners, they were referred to Druk holding investments, when approaching Bhutan power corporation for consideration on power tariff and penalties in the wake of the current crisis. When seeking of the banks a bridge loan, owners say, the prudential regulation of the royal monetary authority (RMA) became a problem. “We’d like the government and the ministry to be a bridge between the concerned agencies and us to revive the falling industries,” said a steel owner.
They have a loan debt of around Nu 1.6 billion from individuals as well as consortium loans. They were also among the top ten largest borrowers in Bhutan. However, according to the prudential regulation of RMA, the aggregate sum of 10 single largest borrowers should not exceed 30 percent of the total loans and advances. Lyonpo Khandu Wangchuk has said that the government will look into the matter.
The owners have put up a proposal to waive the prudential regulation for at least 3 to 6 months. “In my case, we’ve reached a situation of hand to mouth survival and almost all of us will have to shut down our industries if something’s not done sooner,” said a woman industrialist.
They pointed out that they are not at a loss because of no market. “We have a market but the only thing we don’t have is working capital, due to the current global crash crisis. We’re confident that we can recover our losses if we could have the capital to start full production,” said Ugyen, a steel manufacturer.
Steel owners said that they had purchased in bulk raw material at a high rate when the price of steel was high and, when they started production, the prices suddenly dropped, causing them huge losses.