The Prime Minister has approved the plan to restructure the credit institution system in 2011-2015. Selling the debts with collaterals to DATC is one of the solutions mentioned in the legal document as a good choice for debt clearing.
However, experts have said it’s still too early to affirm that this would be a good choice, because at present, DATC still complains that it is facing so many difficulties due to the lack of a perfect legal framework. Meanwhile, the detailed plan on debt restructuring has not been mapped out.
Which scenario for debt restructuring?
On December 17, 2011, the State Bank of Vietnam released a report, showing that the non-performing loans (NPL) ratio was at 3.4 percent of the total outstanding loans, or 85 trillion dong.
Meanwhile, Fitch Rating said that if classifying debts in accordance with international standards, the NPL ratio of Vietnamese banks would be 13 percent instead of 3.4 percent, or 300 trillion dong.
It is difficult to find out how much exactly the NPL ratio of SOEs. According to the State Bank, by the end of September 2011, the outstanding loans to SOEs had reached 416 trillion dong, accounting for 17 percent of the total outstanding loans, which included the NPLs. Meanwhile, in October 2011, Deepak Mishra, Chief Economist of the World Bank, said that SOEs have used up to 60 percent of the total lending, and that SOEs’ debts accounted for 70 percent of banks’ NPLs.
The huge bad debts would put a heavy burden on DATC. In the last six months, since the day of establishment, the company has carried out 109 cases of trading debts and assets under the negotiation mode. The debts and assets purchased by DATC had reached 7 trillion dong.
However, though acting as the only national debt trading company, in many cases, it cannot do anything because “the spirit is willing, but the flesh is weak.”
In case of Vinashin, the shipbuilding group which bogged down in debts, DATC had to make a lot of documents to submit to the competent agencies, but it still cannot approach the debts. Meanwhile, DATC has just announced that it now begins dealing with the debt of the Sericulture Corporation, while the business has been incurring loss for the last tens of years.
Therefore, experts have every reason to worry that DATC alone would not be able to undertake the important task of helping restructure bad debts. With the current conditions, DATC would be able to settle just a very small part of bad debts by 2015.
Pham Manh Thuong, Deputy General Director of DATC, said that while the overall plan on SOE restructuring says the restructuring needs to be completed by 2015, there has been no detailed plan that guides the implementation of the plan. It’s still unclear how many SOEs to be dealt with every year, how to classify the debts in accordance with business fields.
Speeding up on a narrow road
DATC has declined to make comments about if the task assigned by the government can be fulfilled by 2015 as expected, while it has only shown the big difficulties it is facing.
An expert has commented while the State urges to speed up the restructuring process, the road remains narrow, which makes it nearly impossible to push up the restructuring.
Source: SGTT
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