Government to stop providing guarantee for loans to SOEs

Only the SOEs which do not make profits and operate in the fields which have relations to people's lives, such as the environment and social security, will receive the government’s support in borrowing capital.

This means that the state-owned giants like Vietnam Airlines, the national flag air carrier, and Vinatex, the nation’s leading textile and garment group, will have to look for capital themselves rather than rely on the government. 

Deputy head of the Enterprise Finance Agency under the Ministry of Finance (MOF) Dang Quyet Tien made the comment at a workshop on the French Development Agency (AFD) financing through non-guaranteed loans.

Tien said that the government will gradually scale down and then stop the guaranteeing for loans to be provided to SOEs in 2016-2020. This will facilitate enterprises to more actively look for capital from many different sources, which will help them improve the corporate governance and capital use efficiency.

However, MOF will still keep an eye on enterprises’ capital use and their activities to renovate the corporate governance, because the state’s capital still lies in SOEs.

“We will keep an eye on the entire process, from the businesses’ cash flow in the last three years to the cash flow they will use in the next 10-15 years,” Tien said.

“Businesses not only have to use capital effectively and pay debts timely, but also need to improve their corporate governance,” he commented.

According to AFD, one of the institutions which provide loans without government’s guarantee, Vietnam’s public debts have nearly hit the 65 percent of GDP threshold. 

In fact, the government began tightening control over the guarantee granting in late 2015, stating that the government will shrink government’s guarantee and control the repayment.

Chau Dinh Linh, a lecturer of the HCM City Banking University, applauding the decision on reducing the government’s guaranteeing, commented that the guarantee should be undertaken by commercial banks.

According to Doan Xuan Hieu from Vinacomin, which has been relying 100 percent on state’s capital, the group needs some US$1.5 billion worth of capital every year. 

Meanwhile, the capital from the government has been narrowed because of the increasingly high public debt. Therefore, the capital from other sources will play a very important role in maintaining its operation.

Meanwhile, Hoang Phuong, a finance expert from the Electricity of Vietnam (EVN), which needs US$3-4 billion a year, said it was not easy to seek capital from other sources.

EVN borrowed US$100 million from AFD and it has nearly used up the capital.