Experts scrutinise slow pace of bad debt resolution

State-owned Vietnam Asset Management Company (VAMC) was reported to begin selling its bad debt stocks in the first part of the third quarter.

According to Can Van Luc, the director of the Bank for Investment and Development of Vietnam (BIDV)’s staff training centre, bad debts are likely to be sold indirectly to investors through intermediaries in the initial stage.

One investment fund representative was quoted as saying, “In respect to selling debts to foreign investors, the VAMC should hold public auctions to directly present its products to investors instead of selling through middlemen, as no investor wants to buy debts through an intermediary.”

But while advocating that debts should be sold in complete transparency, some experts say that Vietnam is first likely to sell debts indirectly to gain experience before holding public auctions.

“Vietnam needs to sell bad debts in a way that attracts foreign investors first, and from there take the experience to overcome legal obstacles,” HSBC Vietnam deputy general director Pham Hong Hai suggested.

In a report released in early July, HSBC Vietnam experts expressed their concern over the efficiency of how the VAMC is handling the bad debts it has bought up.

“Overall, banking sector reform has been sluggish and the bad debt situation has yet to be tackled in a comprehensive way. With taking immediate action, how will Vietnam settle its bad debts?” the report stressed.

Economist Le Xuan Nghia has suggested giving VAMC more rights in tackling bad debts, “Otherwise, the process will continue to be slow and Vietnam will miss opportunities to sell bad debts.”

Since being established in July last year, the VAMC has been proactive in buying non-performing loans from banks.

Buy early July this year it had bought more than VND50.7 trillion ($2.4 billion) in NPLs and is readying to buy another VND1.2 trillion ($57 million) from state giant VietinBank.

However, at this point the VAMC has only succeeded in selling and rectifying around VND996 billion ($47.4 million) of bad debts.

According to VAMC chairman Nguyen Quoc Hung, the organisation has developed a list of debts that may appeal to foreign investors and around 10 potential overseas buyers have expressed interest.

But not a single transaction has yet to be made because of a lack of guiding documents and authorities being too slow in completing legal procedures due to their fears of the risks associated with the process.

Also, foreign investors have reportedly valued the debts they want to buy at only about 30 per cent of the original value, which has made the VAMC reluctant to sell.