Vietnam won't bail out weak firms: official

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Vietnam's government only helps state-owned enterprises (SOEs) get more time to pay their loans and debt restructuring will not include rescuing weak companies, a Finance Ministry official said.

Loans worth a total of US$300 million from the Asian Development Banks will be given to SOEs starting next year so that they can repay existing debts, said Dang Quyet Tien, deputy director of the Corporate Finance Department.

"The restructuring will allow the companies to replace short-term high-interest loans with new loans that carry a longer term and a more reasonable interest rate. This will help them improve their cash flow and repayment ability," he told Tuoi Tre newspaper in an interview published Saturday.

Responding to a question on whether the government is favoring state companies, Tien said the goal is to dilute the difficulties that the companies are facing and after all, they will have to repay their own debts.

"The new loans (from the Asian Development Bank) will generally reduce bad debts and improve liquidity for the economy," he said.

But he said only strong companies deemed capable of surviving the difficulties have been slated to receive funds.

"Loss-making companies unlikely to recover will be forced to declare bankruptcy and shut down because we can't keep giving them money," he said.

Vietnam is in a middle of various efforts to revamp the SOE sector, including increasing their transparency and forcing them to withdraw from non-core activities.

SOEs in Vietnam are piling up debts the government is being forced to repay, a report from the Ministry of Finance said last month. The government has been repaying debts for four enterprises, including the Vietnam Paper Corporation and the Vietnam Cement Industry Corporation.

The loans from the Asian Development Bank come under a larger program, which the Manila-based lender launched in 2009 to assist Vietnamese SOEs. In the first phase, the bank provided $130 million worth of loans to the Southern Waterborne Transport Corporation and construction company Song Da.

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