VietNamNet Bridge – The Vietnamese government is determined to bring total bad debts down to 3 per cent in 2015, well below last year’s 5.43 per cent.

Toward this end the government issued Resolution No.01 outlining tasks and solutions to implement the plan for socio-economic development and the state budget in 2015. The plan’s primary objective is resolving the bad debt crisis towards a healthier financial market and more access to credit.

Accordingly, the State Bank (SBV) has been tasked with completing the legal framework for the purchase, sale and management of bad debts and collateral and to clearly define the responsibilities of the borrower and the rights of the creditor.

In accordance with the resolution, foreign and domestic investors are thus encouraged to participate in bad debts trading to enhance the resources of the Vietnam Asset Management Company (VAMC) and to monitor the classification of loans and provisions for bad debts at credit organisations.

According to the SBV, bad debts were at 5.43 per cent of total outstanding loans as of September 2014 and can probably be brought down to 3 per cent within this new year.

In order to achieve this target, as well as requiring credit organisations to set aside appropriate provisioning for bad debts, the VAMC is expected to improve its financial capability and purchase another VND100 trillion ($4.76 billion) in bad debts in 2015. In 2014 the VAMC bought VND123 trillion ($5.85 billion).

Truong Van Phuoc, vice president of the National Financial Supervisory Commission, stressed the urgent need to create certain rights for the VAMC to operate efficiently, for instance the power to manage collateral and mortgages.

Phuoc believed that the target of 3 per cent would be within reason since the economy showed signs of recovery and flourishing growth in 2014 alongside low inflation, strong exports and a stable foreign currency exchange.

Regarding monetary policy, the government has requested that the SBV continue monitoring interest rates and foreign exchange rates in accordance with macro-economic, inflation and currency developments. Additionally, the SBV was also required to effectively control credit growth and enhance the quality and management of the foreign currency and gold markets. Concurrently the SBV will keep up its efforts to combat dollarisation and goldenisation and bolster foreign currency reserves.

For 2015 the SBV has a target of 13-15 per cent credit growth with an increase of 16-18 per cent in total means of payment.

“If recovery is maintained together with meticulous restructuring of the state-owned enterprise sector and enhancements to the investment environment, it is within our grasp to reduce bad debts to 3 per cent,” Phuoc said.

VIR