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Vietnamese lawmakers against gov’t plan to write off debts of state-run firms

Tuesday, November 03, 2015, 14:06 GMT+7
Vietnamese lawmakers against gov’t plan to write off debts of state-run firms
A MobiFone ad banner for 3G service is seen in this photo illustration taken in Ho Chi Minh City. Mobifone is a big state-run telecoms firm having undergone a restructuring recently.

Many deputies of the lawmaking National Assembly of Vietnam have told local media that they disapprove of a government plan to write off debts incurred by inefficient state-owned enterprises (SOEs).

>> An audio version of the story is available here

According to the government’s plan, the debt relief will be applied to those SOEs that are undergoing privatization.

According to Phap Luat TPHCM (Ho Chi Minh City Law) newspaper, Minister of Finance Dinh Tien Dung, authorized by the prime minister, on Tuesday last week presented a report on the bill amending and supplementing some articles of many tax laws.

In particular, the report also mentioned the tax relief of VND1.3 trillion (US$58.5 million) for SOEs that will be subject to privatization, Phap Luat TPHCM reported.

Previously, huge losses by big SOEs, like Vinashin and Vinalines, have been covered by the state budget, which means that tens of thousands of billions of taxpayers’ money have been wasted, said Vo Thi Dung, a legislator from Ho Chi Minh City.

“Now we come up with a plan to write off those debts without sorting somebody out to take responsibility for the liability,” Dung said.

The government said without removing the tax liabilities, it will be hard for them to go through the privatization process, according to the legislator.

The lawmaker told Tuoi Tre (Youth) newspaper that the reasoning is unacceptable for Vietnamese voters and citizens, as the government has also stressed the importance of equality among the national economic sectors, including SOEs and private firms.

Before submitting the tax relief plan, the central government should have shown the National Assembly a list of SOEs whose debts should be written off for consideration, Dung said.

The list should have been accompanied by reports about why those state-owned firms suffered such losses, she said.

The legislature needs a full report as deputies then have to report back to their constituents, Dung explained to Tuoi Tre.

The National Assembly cannot agree to an indiscriminate policy to apply tax relief to all SOEs, enabling remaining firms not included in the list to find a way to get in.

Such a policy does not solve inequality and creates a dangerous precedent for many more SOEs which suffer losses, often due to corruption or embezzlement by their leaders, as they know that debt burdens will be relived once they are privatized, Dung added.

Those responsible for the losses must pay them back, she underlined.

“I do not believe tax debt relief policy promotes the process of privatization, as it will only leave financial consequences unsettled,” she added.

The proposal is also unacceptable in the context of the stress it places on the budget for this and the following year, requiring the government to access foreign loans and borrow from the State Bank of Vietnam in order to restructure the debt and to finance spending, she added.

Many other lawmakers, including economist Tran Hoang Ngan from Ho Chi Minh City, Deputy Chairman of the Legal Committee Le Minh Thong, and deputy Mai Xuan Hung from the Mekong Delta province of Hau Giang, have echoed the thoughts of Dung.

In the middle of last month the government sought the permission of the National Assembly to issue $3 billion in sovereign bonds in 2017 to restructure domestic debts incurred during 2015-16, following a successful $1 billion sovereign bond issuance last year.

If approved by the National Assembly, the 2017 sovereign bond issuing will help finance the debt repayment for government bonds maturing in the 2015-16 period, which may amount to VND363.17 trillion ($16.14 billion).

According to news website the Saigon Times Online, the Ministry of Finance will borrow an additional $1 billion from Vietcombank at a rate of 3-4 percent per year, lower than the interest of 4.8 percent in a $1 billion loan the bank offered to the ministry in May.

Meanwhile, the ministry has already received the VND30 trillion ($1.35 billion) it had borrowed from the State Bank of Vietnam, Dao Xuan Tue, deputy director of the State Budget Department under the finance ministry, said at a press meeting in Hanoi on October 2.

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