VietNamNet Bridge – Though recognizing the efforts by the Vietnam Asset Management Company (VAMC), experts have pointed out that VAMC is not experienced enough to deal with bad debts.

To date, VAMC has bought VND4.978 trillion worth of bad debts on banks’ books. However, the question now is not how much debt VAMC can buy, but what VAMC would do with the debts.

VAMC would re-sell the bad debts it purchases to other institutions could be the answer.

However, Dr. Phan Thi Thu Ha from the Banking and Finance Institute of the Hanoi Economics University, said on Lao dong newspaper that she cannot imagine how VAMC can sell bad debts.

The expert pointed out that the Vietnamese VAMC’s operation model is not similar to South Korean Kamco. Credit institutions cannot sell bad debts to VAMC definitely. In case VAMC cannot settle the debts, banks will have to deal with the debts themselves.

Bui Kien Thanh, a banking expert, when asked what VAMC would do with the bad debts it purchases, said it’s necessary to analyze how VAMC buys debts.

VAMC said it buys debts in book value, while it’s still unclear if it is the original book value or the debt value after deducting the provisions.

It would be questionable if VAMC buys debts in original book value, because no one would buy goods at their original values while he does not know the actual value of the goods at this moment.

The Circular 19 stipulates that VAMC will buy debts in accordance with the “market price.” However, the words don’t have meaning, because there has been no market yet, and it is VAMC which sets the prices.

VAMC said the majority of the bad debts have collaterals. If the collaterals are real estate products, two problems would arise.

First, the assets don’t have transparent legal basis. If so, VAMC will need the support not only from the State Bank of Vietnam, but also from the Ministry of Finance and other relevant ministries to clarify the legal origin of the products and the tax.

The second problem is VAMC would have to follow a lot of complicated procedures to sell the collaterals to get money, which may go beyond its capability.

Dominic Mellor from the Asian Development Bank (ADB) also said on Dau tu chung khoan that that the assets mortgaged for the loans, or the most important basis for the debt settlement, are covered by other laws. Real estate products, for example, which were the collaterals in most of the loans, bear the control of the Land Law as well.

Simon Andrews, the IFC Regional Director in charge for Vietnam, Thailand, Cambodia and Laos, while confirming that IFC wishes to join the Vietnam’s bad debt settlement process buy buying the debts, also said Vietnam is a new market and Vietnam still does not have experiences in dealing with shocks.

He said that the legal documents remain unclear enough about how to settle debts. Meanwhile, foreign investors will only buy Vietnamese debts if they know what they are allowed to do with the debts.

VAMC last week bought two debts worth VND1.397 trillion in book value from SCB and Phuong Nam Banks. It said ¾ of the purchased debts relate to real estate.

Compiled by C. V