VietNamNet Bridge – The economic development model which relies much on the investment capital increase is believed to be the “culprit” that causes the high public debt.

Foreign institutions say $128.9 billion, Vietnam says $66.8 billion

Dr. Nguyen Trong Hau from Almammer University in Poland, citing the calculations of the UN experts, said that Vietnam’s total public debt has reached $128 billion in accordance with the international practice. The figure is equal to 106 percent of the GDP in 2011, or nearly double the figure released by the government of Vietnam.

Dr. Luu Bich Ho, former Head of the Strategic Research Institute, an arm of the Ministry of Planning and Investment, said that the figures prove to be confusing and unreliable.

Foreign institutions said that in 2011, Vietnam’s public debt was $128.9 billion, equal to 106 percent of GDP, while the Ministry of Finance of Vietnam released the figures of $66.8 billion and 55 percent of GDP.

Explaining the difference in the figures, Hau said that international experts calculate the public debts by considering five factors, while Vietnamese consider 3 factors only. The two factors which have not been considered by Vietnam are the debts incurred by the state owned enterprises and the state’s borrowing from the pension fund.

Hau said that with the current Vietnamese calculation method, some huge debts worth billions of dollars like the Vinashin’s ones have not been counted on.

Meanwhile, in other countries, any loans to state invested enterprises would be counted on as public debts, even though the state only holds several percent of stakes in the companies.

Hau has warned that a lot of private debts may also turn into public debts. In principle, when real estate developers borrow money from foreign sources, these are listed as the private debts. However, if the developers cannot pay debts due to the current gloomy market, the state may have to come forward and pay debts for them in an effort to avoid the domino effects to the national economy. If so, the public debts would increase rapidly.

Dinh Mai Long, MA, from the President’s Office, has also warned that in case state owned enterprises fall into dissolution, the government would have to pay debts for them, even if the loans are not guaranteed by the government.

Vietnam urged to follow international practice

Hau believes that Vietnam should follow the international practice when calculating public debts. This would allow Vietnam to have a better outlook over the debt situation and make reasonable decisions to settle debts.

Dr. Nguyen An Ha from the European Research Institute said he can find many similarities in the public debt situations in Vietnam and PIIGS, the countries in the public debt crisis. Their GDP has been decreasing since the global financial crisis 2007, while the inflation rate has been increasing (always higher than 8 percent).

Therefore, Ha has urged the government to think of the measures to settle the problem, or it is too late.

Long has noted that the borrowing from China has been increasing rapidly over the last few years, reaching $1.2 billion. The public debt has increased rapidly by 15 percent per annum, which nearly “catches up” with the increase of 17-21 percent in the tax collection to the state budget. This means that the increase in the state budget’s receipts in the next few years would be only big enough to pay debts.

Pham Huyen