The National Financial Supervisory Commission has announced a report listing six areas with the highest rates of bad debts in Vietnam.
Processing, manufacturing sectors top the list for bad debt
The processing and manufacturing sector topped the list, with an estimated bad debt rate of 21.15%, followed by the wholesale and retail, with 16.93%; other portions of the service sector clocked in at 12.51%. After these came real estate at 11.37%, construction at 10.13% and transport and depot service area with 9.43%.
The rate of bad debt within these sectors is between two and five times more than average in other areas.
In the first half of this year, only the transport and depot service sectors saw any considerable decrease in bad debt, down to 9.34% at the end of April from 13.4% by late 2011. Meanwhile, for the rest of the areas mentioned, bad debt has only slightly decreased or even gone up.
The report indicated that state-owned enterprises account for 11.82% of credit organisations’ total bad debt. In addition, this figure excludes Vinashin’s debts, which have been restructured under government decision.
The National Financial Supervisory Commission said that bad debt from state-owned enterprises poses an especially large challenge because they generally have low liquidity.
Nguyen Van Binh, Governor of the State Bank of Vietnam, recently said that Vietnam Asset Management Company (VAMC) could help to solve between VND40,000 (USD1.9 billion) and VND70,000 trillion (USD3.33 billion) in bad debts this year. However, some local economists remain skeptical.
Economist Le Xuan Nghia, head of the Business Development Institute, said the company started operations on July 9, but its two most important regulations, Internal Operation Regulation and Special Bond Issue Regulation, have not yet been signed.
He added that even ideally, VAMC will only deal with one third of bad debt, leaving private banks responsible another third and the Ministry of Finance for the remainder.