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Labour minister, State Bank chief field lawmaker queries

Update: August, 22/2012 - 09:37


State Bank of Viet Nam Governor Nguyen Van Binh. — VNA/VNS Photos Phuong Hoa
Minister of Labour, Invalids and Social Affairs Pham Thi Hai Chuyen.
HA NOI — Foreign workers, bad debt and interest rates were the focus of yesterday's Q&A session at the National Assembly Standing Committee meeting in Ha Noi.

Minister of Labour, Invalids and Social Affairs Pham Thi Hai Chuyen and State Bank of Viet Nam Governor Nguyen Van Binh were challenged by deputies during a live broadcast.

About 40 per cent of the 78,400 foreigners currently working in Viet Nam did not have work permits, Deputy Minister of Public Security To Lam said during the afternoon session.

This raised concerns over the loose management of foreign workers in the country.

Bui Sy Loi, deputy chairman of the National Assembly's Committee for Social Affairs, said inspections showed that many localities were not aware of how many foreigners were working in their vicinities.

He cited police failure to track escaped Chinese "doctors" from the Ha Noi – based Maria clinic following the death of a patient in July as an example of poor management.

Lam pointed out that foreign workers often came to Viet Nam either following their projects, or as tourists.

Lam said it was difficult to manage them or deport them due to limited funding when problems arose.

Minister Chuyen said management of foreign workers was not strict enough, and enterprises failed to follow Government regulations.

She said that regulations on the management of foreign workers in Viet Nam should be revised.

She added that the amended Labour Code, which would come into effect in May 2013, would include new specific regulations on the management of foreign workers.

National Assembly deputies from many provinces also expressed their dissatisfaction towards the implementation of the National Strategy on Vocational Training Development for the 2011-20 period.

Many of them said vocational training programmes for farmers had cost the Government a lot of money, but had so far proven ineffective.

According to Ngo Thi Minh, a deputy from the northern province of Quang Ninh, from her experience of on-site inspections, training programmes in localities had cost a lot of money but did not meet the needs of farmers.

"Training courses have not effectively connected with the demands of the labour market," she said.

NA deputies also mentioned the low percentage of workers in ethnic minority groups who received vocational training.

In response, Chuyen acknowledged that the percentage was very low, at about only 8 per cent during the 2006-10 period.

She said most of those from ethnic groups who received vocation training only attended short-term courses.

She attributed the situation to farmers' unwillingness to overcome difficulties such as having to travel long distances to attend courses, and the poor economic conditions in remote areas.

In particular, she said it was difficult for farmers in remote areas to find jobs because enterprises did not want to invest there. Creating jobs after the completion of training courses, therefore, was a challenge for these localities.

She said the Ministry would find ways to organise training programmes that suited the conditions of people in these areas.

Chuyen also said that this year, MOLISA would conduct inspections on the implementation of vocational training programmes throughout the country.

National Assembly deputies also grilled State Bank of Viet Nam Governor Nguyen Van Binh with thorny questions on hot issues relating to bad debt and interest rates at the 10th session of the NA Standing Committee yesterday.

Many deputies asked the Governor to explain various figures regarding the bad debt ratio of Viet Nam's commercial banks and financial institutions.

According to the global credit rating organisation Fitch Ratings, the bad debt ratio out of the total outstanding loans at Viet Nam's credit institutions had hit 13 per cent.

However, based on the data provided by local credit institutions, the total bad debt was only VND117.7 trillion (US$5.6 billion), making up 4.47 per cent of outstanding loans.

In contrast, inspectors from the State Bank of Viet Nam (SBV) reported that the total bad debt had reached VND202 trillion ($9.62 billion), accounting for 8.6 per cent of outstanding loans.

Binh attributed the different figures to the methods used to classify bad debt and record bad debt in the banks' financial reports, as well as other objective and subjective reasons. However, he affirmed that the ratio of 8.6 per cent was the official figure endorsed by the SBV.

"The ratio provided by the banks was lower than the official SBV figure because the banks wanted to recognise their lower bad debts in a bid to decrease cash reserve ratios in the hope of cutting costs in the face of current difficulties," he said.

The cash reserve ratio or reserve requirement is a central bank regulation that sets the minimum reserves each commercial bank must hold (rather than lend) of customer deposits and notes. It is normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank.

Under the current rules, there are five debt group classifications: group 1 – good and no need for reserves; group 2 – reserve ratio at 10 per cent; group 3 – 20 per cent, group 4 – 50 per cent and group 5 – 100 per cent.

Binh pointed out five reasons for bad debt. They included the global and local economic downturn; out of date SBV regulations; a shortage of supervisors and inspectors; responsibilities of commercial banks; and responsibilities of enterprises and borrowers.

"There are a lot of credit institutions in the market, and they have to compete with one another. Limited appraisals on the effectiveness of business projects and loan misuse by companies also caused bad debt," he said.

However, the ratio was not too high. For instance, in 1998, the bad debt ratio in Thailand was 47 per cent, Indonesia was 50 per cent and South Korea was 17 per cent, he added.

Deputy Ngo Van Minh was worried that the SBV had asked commercial banks to apply annual deposit interest rates of 9 per cent, and annual lending interest rates of 15 per cent. But in fact, the banks still managed to offer deposit rates at around 11-12 per cent per year. Was the rule feasible?

Binh said: "The SBV has called on credit institutions to cut the interest rate of old loans to 15 per cent in the spirit of sharing difficulties between banks and businesses. In reality, it is feasible."

Before July 15, the proportion of loans with an interest rate of over 15 per cent accounted for 65 per cent of the total outstanding loans. The proportion decreased gradually to 30 per cent by August 3 and to 24 per cent by August 16. — VNS

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