Vietnam says to guarantee certain foreign loans
HANOI - Vietnam will give a
government guarantee to foreign loans that meet certain
criteria, according to a new decree aimed at tightening
management of offshore borrowing.
The decree was signed by Prime Minister Phan Van
Khai on Saturday and takes effect on November 22. A
copy was obtained by Reuters on Wednesday.
It said such guarantees under the decree would
effectively turn the borrowing into state debt.
Foreign lenders have balked at getting involved in major
infrastructure projects in communist-ruled Vietnam
without explicit government guarantees that the funds
would be repaid.
Vietnam classifies foreign debt statistics as a state secret
but a report released by the International Monetary
Fund last April put the country's external debt in
convertible currencies at $8.3 billion in 1996. The IMF
said Vietnam's external debt in 1995 was $6.5 billion.
The decree said if foreign lenders involved in project
financing requested a government guarantee on
commercial loan repayment, Hanoi would consider and
provide guarantees under the following cases:
-- If the project being funded by offshore loans was
considered important for the country's economic
development.
-- If the project was to import hi-tech equipment or to
produce priority goods for export.
-- If the commercial borrowings were connected with
foreign aid or overseas development assistance.
But the decree said such guarantees would only apply
when certain state firms or credit institutions were
involved in the project.
It said those were state-owned firms or credit
institutions allowed to borrow foreign funds and which
were responsible for investing in development projects,
establishing joint-ventures with foreign partners or
expanding credit activities.
In special cases the prime minister might permit a
guarantee for a particular entity excluded from the
decree.
The decree gave no definition of priority goods or what
might be an important project for the country's
development.
As quoted briefly in Vietnamese media on Monday, the
decree said Hanoi would strictly monitor funds
borrowed offshore to ensure they were used
appropriately.
No state company could borrow offshore without
approval from the central bank, the State Bank of
Vietnam, it added.
The decree said the prime minister would vet an annual
plan for total foreign borrowings by enterprises --
including foreign firms -- in the country.
It said medium- and long-term loans, including the
issuance of bonds overseas, must follow an annual
masterplan approved by the prime minister.
All foreign loans must be registered with the central
bank and all borrowers must submit periodic reports to
the bank about the status of the loan, the decree added.
It said the central bank governor needed to submit and
get approval from the prime minister on annual plans for
short-term loans, including funds used to pay overdue
letters of credit.
Banks could withdraw funds from medium- and
long-term loans and make repayments only after the
borrowings were registered with the central bank and
written approval given by the authorities.
Reuters - November 11, 1998.
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