Vietnam launched an asset firm to buy up the bad debts of its banks on Friday, a move touted as one of its biggest reforms but seen as merely a band-aid fix for its ailing, credit-starved economy. The State Bank of Vietnam (SBV) has faced long delays in setting up the Vietnam Asset Management Company (VAMC), or "bad debt bank", to rescue dozens of lenders crippled by what economists say is Asia's highest ratio of non-performing loans (NPLs).
The central bank's plan remains vague and the task is seen as a barometer of Vietnam's commitment to restructuring a once thriving economy fast losing its appeal among foreign investors. It grew 5.03 percent in 2012, its slowest pace in 13 years. The poor state of the economy has been blamed on banks that lent carelessly, especially to state-owned firms, leading to a credit drought, a real estate market crisis and bankruptcy of at least 120,000 businesses since 2011, government figures show.
At Friday's launch, SBV officials shed little light on how the asset management firm would operate and the central bank governor sought to temper expectations. "This is not a magic wand to make all bad debt disappear. It's just a tool to help solve the bad debts in the banking system," Nguyen Van Binh said in launching the VAMC, adding its aim was to bring NPLs down to a "manageable" level by 2015. The concept is similar to Thailand's when it set up an asset management firm in 2003 in the wake of the 1997-98 Asian economic crisis to tackle an NPL ratio of nearly 20 percent.
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