VietNamNet Bridge – In a last-minute move, the government has decided not to settle bad debts with money from the state budget, which had been suggested by the Ministry of Planning and Investment.

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The Government Office, in a report on economic restructuring of public investment, SOE and the banking industry, told the Ministry of Planning and Investment (MPI) that Deputy Prime Minister Vu Van Ninh had agreed to not use state money to settle the debt.

MPI’s Minister, authorized by the Prime Minister, will speak about the issue before the ongoing session of the National Assembly.

Previously, in a 70-page report on economic restructuring in three major fields, the government unexpectedly proposed to reserve part of the state budget for the settlement of SOEs’ bad debts.

There was no official figure about the bad debts of SOEs. However, a report showed that the total debt of the economic sector had reached VND1,600 trillion, or $80 billion. There are about 1,000 operational SOEs.

The information about the debt settlement caused a stir among the public. While some experts supported the solution, saying that settling the bad debts would ensure the normal operation of the national economy, others expressed strong opposition.

Dr. Le Dang Doanh, a renowned economist, said that it was unreasonable to try to settle bad debts with the state’s money at a time when the national economy is still in difficulty and the public debt has increased rapidly.

Doanh said that once SOE debts are settled with state money, enterprises’ debts will become sovereign debts. If so, the public debt will be even higher.

Dr. Tran Du Lich, a National Assembly’s Deputy, said it would be better not to spend the state’s money on settling bad debts, because the money needs to be allocated to many investment and development projects.

Lich said the government should settle bad debts from other sources, rather than from money from the state budget.

One of the sources, as suggested by Lich, is the SOE equitization fund, now being held by the State Capital Investment Corporation (SCIC), a powerful company which specializes in making investments in businesses with state money.

Meanwhile, Governor of the State Bank Nguyen Van Binh noted that some governments had spent 7-10 percent or 20-30 percent of GDP to settle bad debts, but Viet Nam had not considered doing this.

The latest report on bad debt settlement showed that as of the end of September, VND249 trillion, or 53.6 percent of the total known bad debts, had been settled. The Vietnam Asset and Management Company (VAMC) has reportedly bought VND90 trillion worth of debt.

Dat Viet