Scale of debt in banking sector and bloated state firms lays bare pernicious influences of cronyism in Asian tiger economy
Vietnam's stuttering economy, once a darling of the World Bank and a rising tiger of south-east Asia, received a further blow this week with the bailout of the crisis-struck state-owned Sacombank.
The State Bank of Vietnam (SBV) announced it was preparing to inject 28 trillion Vietnamese dong ($1.4bn) into Sacombank following the resignation of the latter's chairman, Dang Van Thanh. This is the second time in recent months the central bank has found itself shoring up its ailing client banks. In August, it took the unprecedented step of publicly assuring depositors their money would be safe following the arrest of the tycoon Nguyen Duc Kien, co-founder of Vietnam's fourth-most valuable bank, Asia Commercial Joint Stock Bank.
However, Vietnam's troubles run wider than its banking sector. In 2009, in a bid to stave off the worst of the global economic downturn, the government made a huge tranche of cheap credit available to its giant state-owned enterprises (SOEs), which dominate key sectors of the Vietnamese economy. Many of these SOEs used this credit to diversify into industries in which they had little or no experience. PetroVietnam has significant concerns in hotels, securities, real estate, insurance and even taxis. Vietnam Electricity (EVN) has holdings in telecommunications and education, and shipbuilding giant Vinashin in catering, distilling and insurance.
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