VietNamNet Bridge – The government has unexpectedly proposed to the National Assembly the use of the state budget to settle bad debts incurred by SOEs, even though the legislature has said that SOEs must take responsibility for their debts.

Many people believe that it is unfair to use the taxpayers’ money to settle debts of state-owned enterprises (SOEs). But others say that it would be dangerous not to save SOEs, because their bad debt is a national problem.

Dr. Le Dang Doanh, a renowned economist, commented that the government has made such a proposal as a last resort. He said they “have no other choice”.

Dr. Le Xuan Nghia, former member of the National Advisory Council for Monetary Policies, said in Dat Viet that in order to settle the bad debt, which is hindering the normal operations of the economy, there must be a large infusion of cash.

The cash would be pumped into commercial banks through refinancing, allowing the banks to free SOEs from their unrecoverable debts.

Doanh, in an interview given to VTC News, warned that the solution of settling bad debts with money from the State budget would not please the public.

“It is really a funny story that SOEs spend money, incur debts and then ask the State to pay their debts with money from taxpayers,” he said.

The Ministry of Finance, in an effort to reassure the public that the public debt is still within safe limits, has repeatedly said that SOE borrowing was an SOE issue, while SOE debt was not sovereign debt.

If the State pays SOE debts with money from the State budget, that debt will obviously become sovereign debt. If so, the public debt will climb even higher.

Doanh also pointed out that it was unreasonable and biased to use the state’s money to pay debts incurred by SOEs, but not to pay debts incurred by non-SOEs.

Dr. Do Thien Anh Tuan, a lecturer at the Fulbright Economics Teaching Program, said the SOE debts must be settled with SOE resources and money.

“It is necessary to speed up SOE equitization to get money to settle bad debts,” he said.

Doanh said that even if the government’s proposal were approved, it cannot be implemented as the budget has scant money.

A local newspaper cited a report of the National Assembly’s Steering Committee as saying that regular spending alone accounted for 70 percent of total spending.

It also quoted an official as saying that the State budget is “not enough to implement the plan to raise the salaries of civil servants”.

Dr. Nghia warned that if economists and state agencies spend more time arguing, the bad debt situation will get even worse, while lending will freeze.

“If so, the whole national economy, not only borrowers and lenders, and SOEs and commercial banks, will suffer,” Nghia said, adding that settling SOE debts is a national concern.

Kim Chi