Vietnam will approve a detailed plan in the next few days to form a debt-management company, boosting the government’s efforts to revive a struggling economy.
“There is no model in the world for forming this kind of company that we can completely copy,” Vu Duc Dam, chairman of the Government Office, told reporters in Hanoi yesterday. “During the company’s operations, we will constructively listen to comments to adjust it if necessary.”
The government is trying to spur expansion that last year was the least since 1999 after rising levels of bad debt crimped lending. Prime Minister Nguyen Tan Dung has approved a master plan to revamp the economy and set up a steering committee to restructure banks by 2015, even as the debt-management company was previously delayed until at least the end of April from an earlier end-March deadline.
“This is an important step,” said Alan Pham, who helps oversee about $1.5 billion as the Ho Chi Minh City-based chief economist at VinaCapital Group. “But it’s just the beginning. We are looking for a clear roadmap on how the non-performing loans problem will be tackled, with definite milestones along the way, and criteria to judge the progress.”
The central bank has submitted a detailed plan on the debt-management company for the prime minister to review, Dam said. He did not specify when the company would be established.
The central bank may consider capping commercial lending interest rates to help spur loan demand, according to a government statement released in Hanoi yesterday. The government plans to step up measures to boost lending while controlling money supply to keep inflation under control, it said.
Bank lending growth slowed to 0.03 percent this year through March 21, the government said on April 3, after expanding 9 percent in 2012, the slowest pace in at least two decades. The central bank targets 12 percent growth this year.
The economy expanded 4.89 percent in the first quarter from a year earlier. The trade deficit widened to a worse-than-estimated $1 billion in April, according to government data.
Vietnam’s credit channel is “impaired” even as lending rates have responded to lower interest rates, International Monetary Fund economists Ashvin Ahuja and Nombulelo Duma said in a note this month. The monetary authority lowered borrowing costs in March, the seventh reduction since the start of 2012.
The Ho Chi Minh City Stock Exchange’s benchmark VN Index fell 0.4 percent to close near a seven-week low before Dam’s comments. The dong declined 0.1 percent to 20,930 per dollar.