Nov 1, 2012

Vietnam - Gov’t shouldn’t rescue weak banks – expert

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HCMC – A well-known economic expert last week suggested that the Government should not try to rescue weak banks, but just let them go bankrupt.

Jonathan Pincus, Academic Dean of the Fulbright Economics Teaching Program in Vietnam, told a luncheon held by the Eurocham last Friday in HCMC that those banks that fail the “stress test” should not be rescued.

Pincus said the Government should divide banks into two groups that can and cannot pass the difficult situation, and just need to support healthy banks.

He said at the luncheon that if the Government helped banks to solve their bad debts, it would mean moving the bad debts from the balance sheets of banks to the national balance sheet while the Government now also had debts to solve.

“Who will pay at the end?” he pondered, adding that with the economic downturn the Government might have to increase taxes later.

Instead of finding ways to rescue banks, Pincus suggested that the Government should support successful areas of Vietnam like agriculture and manufacturing like garments and shoes.

“The Government should support them to continue what they are doing successfully now,” he added.

Asked to predict when a new foreign capital wave will come to Vietnam like in 2007, Pincus said the problem in Vietnam now did not rest with the lack of money, but rather how to use money sufficiently.

He gave an example that Vietnam every year received billions of dollars of remittances.

“The country doesn’t lack money; the problem is how the money has been used,” he said and added that much money was channeled into real estate and the stock market but not into real economic activities that would help Vietnam increase their competitiveness.

“I think the question shouldn’t about the volume of capital but how to use it sufficiently,” Pincus said.

At the luncheon, Nguyen Quang A as another speaker said that the Government shouldn’t rescue the property market either, because even if they want, they don’t have enough resource to do so.

In an encounter with local media last week, Nguyen Huu Nghia, chief inspector of the central bank of Vietnam, estimated the banking system’s non-performing loans at 8.6% of the total outstanding loans.

Given the total outstanding loans at around VND2,500-2,800 trillion, the amount of bad debts is estimated at VND215-240 trillion.

Thuy Trieu - The Saigon Times Daily

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