Resolution no. 42 could be a lasting solution to tackling
Vietnam’s bad debts even if it was introduced on a
pilot basis. Some of its provisions, most notably a new right
to seize secured assets, could well provide a solution to the
country’s growing non-performing loan (NPL)
problem.
The new rule was issued in August 2017 with the intention to
create a better legal framework to address credit
institutions’ NPLs, and, from there, to enhance
their funding. Plans to privatise state-owned enterprises,
which have historically been a key source of bad debt, have
been in the pipeline for many years but have so far not
materialised.
Vietnam’s total public debt has gone from 35%
of the GDP in 2011 to 62.4% of GDP in 2016. NPLs stood at 9.5%
at the end of 2017, far greater than in China, another
jurisdiction which has been battling similar issues...