VietNamNet Bridge - The government has denied that acting as a guarantor for enterprises to borrow capital would threaten the nation’s financial security, saying that the involved parties have to follow strict procedures to avoid risks.

The report on the business performance of state-owned enterprises (SOEs) in 2014 submitted by the government to the National Assembly showed that the SOEs’ total accounts payable has reached 1,570 trillion, an increase of eight percent compared to 2013. 

The report has raised the fear that the huge debts incurred by SOEs would be a threat to the nation’s financial security.

The Government Office’s Chair Nguyen Van Nen, at the regular press conference on November 27, said that the government guaranteed debts account for 19 percent of total public debts and 11.4 percent of GDP. Meanwhile, Government’s debts account for 80 percent of total public debts, while local authorities’ debts account for one percent. 

Nen said the government acts as the guarantee for enterprises to borrow capital because it wants to help enterprises access valuable funds from credit institutions which set strict requirements on borrowers. The costs of the loans guaranteed by the government, in most cases, will be lower than the costs of normal commercial loans.

“The government’s guaranteeing for enterprises’ loans is always done in accordance with strict regulations on government guarantee granting and management, stipulated in decree No 15/2011,” Nen said.

He said that the government’s guarantee was issued to borrow foreign capital to implement urgent key investment projects which significantly influence socio-economic development. 

SOEs have to use loans for the appropriate purposes, shoulder risks and take responsibility under the laws for its process of mobilizing capital, managing and using loans. Meanwhile, the government only issues guarantees within limits set every year.

Nen tried to calm the public down when saying that the total debt of VND1,570 trillion ($69.8 billion) incurred by state-owned economic groups and general corporations is equal to 1.41 times of the stockholders’ equity, lower than the allowed limit of  three times. Meanwhile, SOEs still can arrange money to pay debts on schedule every year.

However, people still showed concern about SOEs’ solvency and the burden the SOEs’ big debts put on the state budget.

It is the state which will have to come forward and pay enterprises’ debts in case enterprises take losses and cannot pay debts. Vinashin is a typical example.

The World Bank, in its recent report about Vietnam’s public debt, commented that the prolonged fiscal imbalance has raised concerns in the context of the public debt increase.

The World Bank estimated the budget deficit to be 5.6 percent of GDP in the first half of 2015.

Bizlive