...Nor a borrower be

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Vietnam's large foreign loans need to be invested wisely and effectively in order to ensure repayment in coming years, several experts have advised.

In 2009, Vietnam's debt stood at 41.9 percent of the gross domestic product, according to Finance Minister, Vu Van Ninh. Vietnam was not overdue on any of these loans. "We are managing the debt within the permitted range," Ninh said, adding that borrowing below 50 percent of GDP is considered "safe."

Vietnam's debt has increased from 34 percent of its GDP in 2008. Foreign debt makes up about 58.8 percent of Vietnam's outstanding borrowings, according to the Finance Ministry. Vietnam is expected to pay off more than US$1 billion of its foreign debt, including interest, this year; the figure is expected to increase to $2 billion in 2016, before gradually reducing in following years.

Certain economists have dismissed the debt level as a matter of minor concern because most of the debt is drawn from long-term, low-interest development loans supplied by organizations like the World Bank, IMF, Asia Development Bank and Japan.

Cao Sy Kiem, a member of the National Financial and Monetary Policy Advisory Council, said Vietnam's debt has not reached an alarming level. Kiem seems to be more concerned with the way the money is used rather than the amount that has been borrowed.

"If the funds are not effectively invested, borrowing will accumulate and we will sacrifice solvency and prestige," he said. "It is a big concern."

Several economists have said that, as a developing nation with limited capital, Vietnam should continue to seek out loans.

According to economist Vo Dai Luoc, while Vietnam can borrow loans if it lacks capital, it is necessary to consider the effectiveness of loan usage.

"The most important thing is spending loans effectively. If our borrowed capital is effectively spent, the [country] will be solvent," he said.

Independent economist Bui Kien Thanh is concerned about the ineffectiveness of much of the spending. He said it is not easy to raise capital by issuing bonds overseas. Government agencies have been slow to invest the funds raised from the bond sales into working projects. Meanwhile, the government still has to pay interest on the loans, Thanh said.

The country should take precautions to ensure that the funds are effectively managed and are not embezzled, he said.

Dang Van Thanh, former deputy chairman of the National Assembly's Finance and Budget Commission, said it is necessary to take a more discriminating approach to its loans. "We should be more active in borrowing preferential loans, considering Vietnam's capital demand, and investment fields."

Tran Du Lich, former head of the Ho Chi Minh City Economics Institute believes the government should seek to establish a long-term plan. "I have suggested that the government should develop a ten-year strategy on debts, which would regulate how much we should borrow each year, how to use the loans, and how to pay them."

The government's practice of guaranteeing business loans for state-owned enterprises concerns Nguyen Duc Thanh, director of the Center for Economic and Policy Research at the College of Economics, Vietnam National University Hanoi.

"We should closely monitor the debt structures the government uses to offset state budget shortfalls," he said. "The government guarantees the loans but businesses use them."

Therefore, it is necessary to clarify responsibility, authority and provisions of these loans, he said. Otherwise, foreign loans will accumulate quickly; big enterprises will create debts, and the state will eventually have to pay them back, he said.

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