No state intervention for preferential credit to SOEs: Vietnam finance ministry

The Vietnamese government does not interfere with the banking system to provide preferential loans to state-owned enterprises (SOEs), the Ministry of Finance has clarified.

The clarification is made in a document sent to the Ministry of Industry and Trade, which leads the working group for negotiating Vietnam’s market economy status with the U.S.

The document says there are no grounds for the U.S. Department of Commerce to allege government intervention in connection to the Vietnam Development Bank (VDB) based on a report released by the Organization for Economic Cooperation and Development (OECD) in 2022.

The VDB, one of two policy banks in Vietnam, makes assessments and grants loans by itself without the state’s interference, the ministry says.

The VDB’s policy of preferential loans for export activities ended in 2017, it adds.

Since 2017, the policy bank can provide loans at interest rates no lower than 85% of that charged by commercial banks in the country. The state budget provides no support for such loans, the finance ministry clarifies.

It says the VDB has to decide on such loans on its own and ensure stable operations.

The VDB can grant preferential loans to all businesses, economic organizations and state agencies with financial autonomy. This means that it can grant loans to both state-owned and private firms engaged in development projects.

The finance ministry document also notes that the VDB plays a very minor role in the country’s financial system, accounting for just 0.3% of the country’s total credit.

On the issue of treasury bonds and corporate bonds issued by the VDB having the same interest rates, the ministry notes that the bank has the autonomy to set the interest rates for bonds with government guarantees.

In fact, the interest rates for bonds issued by the VDB are always higher than those of government bonds, the ministry emphasizes, citing examples of bonds issued in November and December 2021.

The Vietnamese government sent a request to the U.S. in September 2023, asking that its non-market economy status be reviewed. The U.S. Department of Commerce responded that it intends to issue its preliminary decision no later than 150 days and the final results no later than 270 days after the date on which the review was initiated.

In a joint letter sent to U.S. Secretary of Commerce Gina Raimondo last month, eight U.S. senators warned against granting the market economy status to Vietnam, claiming that the country “does not meet the legal requirements established by Congress.”

Earlier this month, U.S. Under Secretary of State for economic growth, energy and the environment Jose W. Fernandez said recognition of Vietnam's market economy status is a quasi-judicial proceeding and not a political decision.