By Donald Lambert – Principal private sector development specialist Asian Development Bank As a result, many SOEs are no longer borrowing through the government, but they are still using debts sub-optimally. That is a big deal. SOEs accounted for 29 per cent of GDP as of 2016 and comprised seven out of Vietnam’s 10 largest corporations in 2018. They are dominant in infrastructure and other sectors that are key to improving Vietnam’s productivity. If SOEs struggle, Vietnam will struggle. This is truer now than before the outbreak of the COVID-19 pandemic because government resources are needed more than ever for public health and economic recovery. To help clarify these issues, the Asian Development Bank undertook a study to identify financially-sound SOEs. A secondary outcome was the identification of broader themes that, if addressed, would better position SOEs to borrow more effectively. The following are six priorities for future action that we identified as part of the unpublished study. Better structuring: Symptomatic of the bank loans that are available domestically in Vietnam, SOEs rely heavily on floating-rate debt that often carries tenors that are shorter than the economic life of the assets being financed. This introduces interest rate and refinancing risk…. Read full this story
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