Vietnam's PM apologizes for economy woes but sees progress

Reuters News
Posted: Oct 22, 2012 7:11 AM
Vietnam's PM apologizes for economy woes but sees progress

HANOI (Reuters) - Vietnam's prime minister made a rare apology on Monday for problems gripping the economy and called for the ruling Communist Party to work with the country at large to implement reforms more quickly and ensure order in its finances.

Nguyen Tan Dung was addressing parliament a week after the party's central committee criticized senior members and promised reforms, including a restructuring of debt-ridden state firms and the banking system.

No disciplinary action was taken against top members.

In his address, Dung noted success in some areas, such as bringing down the trade deficit, but he accepted blame for difficulties, including the lowest growth rate in seven years.

"I seriously admit the large political responsibility of the head of the government and would like to apologize to the National Assembly, the Party and the people for all the government's weaknesses and shortcomings...particularly as regards the supervision of state groups," he said.

"Each of us has frankly looked into our shortcomings and drawn profound lessons in the implementation of our assigned tasks... The Party, the army, the whole nation and the political system need to join efforts with the largest determination to successfully realize the tasks of 2013."

Tan Kim Eng, senior director at Standard and Poor's Rating Services, said the acknowledgement showed Vietnam was learning its lessons.

"The government coming out to acknowledge it can do better can be viewed in a positive way in that going forward they will not repeat the same policy mistakes," he said in Singapore.

S&P in June revised the outlook on Vietnam's BB-minus sovereign credit rating to stable from negative, saying that the risks of macroeconomic and financial instability had subsided.

Moody's, however, downgraded Vietnam to its lowest rating ever last month, reflecting the fragility of the banking system. It said banks needed "extraordinary support".


Dung, in office since 2006, said gross domestic product growth was likely to slow to 5.2 percent this year -- the lowest in at least 13 years, according to the National Financial Supervisory Commission.

Against that, inflation may be kept at 8 percent compared to the government's initial target of 9 percent. The trade gap could be $1 billion for the whole year against an initial target of $10.88 billion, and the balance of payments could show a surplus of more than $8 billion.

That has helped the dong currency stabilize after a series of devaluations in previous years, when inflation, credit growth and the trade deficit all jumped.

Dung said the government was aiming for 5.5 percent growth in 2013 and wanted to keep inflation at 8 percent.

The government, he said, had to "contain inflation at a lower rate than in 2012...basically complete the restructuring of weak financial and credit institutions, resolutely deal with violations in financial and banking activities".

The banking system is creaking under non-performing loans estimated at up to $15.6 billion, as much as 10 percent of total lending. State firms such as shipbuilder Vinashin, which almost collapsed in 2010 under $4.5 billion in debt, account for much of the problem.

Banks have scaled back lending.

"Businesses face difficulties," Dung said. "It's hard for them to access loans while the inventory is large."

The government, he said, would speed up efforts to resolve the problem of non-performing loans by restructuring and making provisions for the debt, dealing with mortgages and considering the establishment of a debt management company.

(Reporting by Ngo Thi Ngoc Chau and by Kevin Lim in Singapore; Editing by Alan Raybould and Ron Popeski)