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External capital needed in struggle to resolve bad debts

Update: September, 11/2014 - 08:56
Figures from the State Bank of Viet Nam show that since its creation in July 2013 till August 20, 2014, the VAMC bought VND56 trillion ($2.63 billion) worth of bad debts from credit institutions but sold only VND1.4 trillion ($65.727 million) of these debts.— Photo baodaklak

HA NOI (VNS)  — A temporary source of capital outside Viet Nam's banking system is needed to resolve the rising problem of bad debts, according to experts.

At a seminar on restructuring banks and resolving bad debts which was held here last Tuesday, experts also said the current policies of the Viet Nam Asset Management Company (VAMC) were too restrictive to solve the problem.

Dr. Tran Du Lich, a member of the National Assembly's Economic Commission, said efforts to solve the problem have so far gained some ground but restrictions remain.

Lich noted that bad debts worth VND184 trillion (US$8.638 billion) have been paid since 2012, but economic difficulties have since given rise to more bad debts.

Figures from the State Bank of Viet Nam show that since its creation in July 2013 till August 20, 2014, the VAMC bought VND56 trillion ($2.63 billion) worth of bad debts from credit institutions but sold only VND1.4 trillion ($65.727 million) of these debts. The modest sales showed that the VAMC's policies and resources remain restricted.

Lich suggested that VAMC improve its financial status by either increasing its charter capital, using the Government's foreign loans or issuing bonds.

A capital source outside the banking system needs to temporarily pump funds into the system to resolve bad debts. The VAMC's VND500-billion ($23.474-million) charter capital is too modest to resolve the bad debts that have currently reached billions of dong, Lich added.

Nguyen Duc Thanh, director of the Centre for Economic and Policy Research, said the Government couldn't use the State budget to resolve bad debts as the budget deficit was large.

Thanh suggested that the Government use around VND100 trillion ($4.72 billion) earned from the sale of State-owned enterprises' assets to resolve the debts.

The Government should grant more rights to the VAMC and apply special policies on dealing with mortgaged assets to better resolve the problem.

Experts also urged the Government to withdraw capital from State-owned groups and corporations early so that the SBV could represent the State in holding the capital.

Petrolimex currently holds 40 per cent of PG Bank's charter capital while Electricity of Viet Nam holds 16 per cent of An Binh Bank, and PetroVietnam holds 52 per cent of PVcomBank's charter capital.

The restructuring of the banks can be implemented only when the SBV holds the capital, experts said.

The VAMC plans to buy bad debts worth US$5 billion by the end of this year, said General Director Nguyen Huu Thuy.

Speaking at a real estate conference organised by Auscham in Ha Noi on Tuesday Thuy told domestic and foreign investors that VAMC has so far bought debts worth nearly $3 billion, reported infonet.vn. There are not only bad debts but also ‘good' assets.

Thuy clarified VAMC's functions and tasks, adding that just as it happens in many foreign countries, the volume of bad debts increases during an economic crisis. To solve this problem, the establishment of VAMC was essential, even though the operation models in various countries are different.

In Viet Nam, VAMC does not buy bad debts with funds from the State budget but had issued bonds in the initial stage. At that time, a number of organisations had thought it was a misconceived idea. However, after 13 months of operation, this model has proved to be a ‘creative' method.

The company currently owns about 40 factories in various sectors including paper, seafood, agricultural products, ports, industrial parks and urban area. This is a good opportunity for the investors to participate in the real estate market, said Thuy. — VNS


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