Government spotlights outstanding SOE debts in new collections guide
Government spotlights outstanding SOE debts in new collections guide
Viet Nam's Government has released new regulations on overdue debt collections at State owned enterprises (SOEs), which underline a message that SOEs must be more responsible in collecting their loans.
Pursuant to Decree No 206/2013/ND-CP that takes effect beginning February 2014, SOEs must identify the responsibilities of individuals or groups in wrongdoings related to overdue debts, and to ask wrongdoers for compensation in line with legal regulations.
If compulsory compensation and debt sales do not fill the loss, SOEs are to use risk provision funds or to calculate enterprises' expenditure allowances.
Regulations call for SOEs that are in the process of transferring ownership must exclude overdue debts in valuing enterprises. Recipients of those SOEs must take responsibility to monitor and collect overdue debts from performing debtors.
Amid rising pressure to revive the economy, the new debt collection guide makes clear Viet Nam's vow to reform SOEs and their deep-seated debt diseases that, according to observers, turn the economy from being an Asian tiger into an unstable economy with serious threats to its financial security.
"The decision is definitely a good move," said Nguyen Hoang Hai, Secretary General of the Viet Nam Association of Financial Investors (VAFI). "The State should no longer be responsible for financial problems of SOEs whose ineffective businesses become horrendously burdensome to the State budget."
As of October 2013, SOEs held 60 per cent of total social capital, or VND900,000 trillion (US$42.70 billion), and also incurred a domestic debt of about VND145 trillion ($6.9 billion).
This group, which occupies a strong position in many areas, enjoys preferable access to capital, land and other resources, and operates under soft budget constraints, contributing a modest 33 per cent to economic growth and 30 per cent of the State budget.
State coffers remain limited, despite the large need for public spending and investment. The government has recently extended the state budget over-expenditure cap from 4.8 per cent of GDP to 5.3 per cent.
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