Most of the debts are borrowed by the government for re-lending

Of this amount, the government has re-lent VND316 trillion to enterprises to fund investment projects. At least VND10.556 trillion lent to 60 projects has become overdue debt. Vinashin, the shipbuilder, the biggest debtor, owes VND8.1 trillion.

Most of the projects were implemented prior to 2010. 

Dinh Trong Thinh of the Finance Academy said that Vietnam’s foreign debts have been increasing rapidly in the last 10 years though it has been warned of the impact of borrowing for national production development, economic growth and finance security.

Most of the debts are borrowed by the government for re-lending. The government also acted as a guarantor for enterprises to get foreign loans. As the enterprises cannot pay debts, the debt burden is on the government as the guarantor.

“It was easy in the past to get the government to act as guarantor for the loans. Agencies were not cautious in examining the investment projects’ feasibility. This has resulted in big overdue debts,” Thinh said.

Regarding Vinashin’s debts, the government of Vietnam has to negotiate with creditors on the payment delay and debt restructuring.

An analyst said that in most cases, the SOEs for which the state has to pay foreign debts are mostly operating in key business fields of the national economy, and they only made investments after getting approval from high ranking officials and appropriate agencies.

However, it is very difficult to place the blame on individuals and agencies for ineffective investment projects. 

This has also happened with 12 unprofitable projects of the Ministry of Industry and Trade which have incurred losses of trillions of dong.

Dinh Son Hung, former deputy head of the HCMC Development Research Institute, commenting about debt worth VND10.5 trillion by December 31, 2016, said that most of the debt are loans provided to enterprises, mostly state-owned enterprises (SOEs).

He said that economists warned the government against acting as the guarantor for enterprises to get loans. In a market economy, enterprises must take responsibility for their debts. 

However, the government continues to act as guarantor, and no agency is in charge of supervising the use of the loans.

Under the current laws, public debt includes the government debt, the debt guaranteed by the government and the debts incurred by local authorities. The total value of the debts by the end of 2015 had reached 61 percent of GDP.

US$1=VND22,000

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