Vietnam’s government will no longer shoulder the debt burden of state-owned enterprises, Minister of Finance Dinh Tien Dung told lawmakers as the country revises its law on public debts.
The draft amendment of the law was submitted to the Standing Committee of the lawmaking National Assembly on Monday, with the finance minister asserting that the government would stop bailing out state companies who fail to repay their own debts.
Dung said only the government-backed debts, not those borrowed by state companies on their own business, should be treated as ‘public’ debts.’
“If state-run firms fail to repay their debts, we should have them declared bankruptcy,” the finance minister said.
“There is no such thing as state companies’ debts becoming national debts.”
Dung added that his ministry had taken reference from 40 countries, “most of which do not count the debts of state companies as public debts.”
You borrow, you pay
Whether or not the government should lose money from its own coffers on debts accrued by state companies has emerged as a prominent issue at a time when Vietnam’s public debt continues to rise.
The government has also had to bail out many loss-making state-owned enterprises after they were unable to repay huge foreign debts.
“By doing so, the government has turned state companies’ debts into public debts, and to be more exact, is creating national debt,” Dr. Tran Du Lich, a Ho Chi Minh City lawmaker, said.
Lich said that state-run enterprises should be fully responsible for their own debt.
“Even when the state holds a 90 percent stake in a company, the government is not necessarily responsible for its debt,” Lich said.
“A loss-making state company should declare bankruptcy when it needs to.”
Dr. Dinh Tuan Minh, a public financial expert, said the amended law on public debt should stipulate a clear distinction between debts borrowed by state companies on their own, and those backed by the government.
“The government will certainly have to repay debts borrowed under its guarantee,” he said.
“No one but the borrower should repay its debts.”
Speaking at Monday’s meeting, Nguyen Duc Hai, chairman of the National Assembly’s finance and budget committee, agreed that debts borrowed by state companies without a government guarantee should not be considered public debts.
However, Hai expressed his concern that Vietnam may lose its credit ranking and financial credibility in the eyes of global partners if state-run Vietnamese enterprises default on their foreign debts.
“There are cases where the government had no choice but repay the debts of state companies,” he said.
Hai suggested that the government tighten its checks on state companies’ borrowing in order to reduce the risk of those enterprises being unable to clear their debt.