Economist Bui Kien Thanh said the Vietnamese monetary system has seen encouraging signals, but still sees three major obstacles in the way of a full market recovery in 2014, including bad debt.

Economist Bui Kien Thanh
According to the economist, the biggest challenge for the local monetary market in 2014 is bad debt. Last year the Vietnam Asset Management Company (VAMC) bought up a large amount of bad debts and plans on continuing doing so in 2014. However, the big task for the company this year will be how to deal with the debt it has already bought. The majority of this debt comes from the real estate sector, which has remained frozen in recent years. How to turn bad debt into money is a challenge for VAMC.

Another big problem on the list is interest rates, which are among factors affecting business operations in the country. The preferential interest rates for Vietnamese companies is around 10%, but the level for overseas and foreign-invested firms in Vietnam is only 1-2%. Currently, the Vietnamese business community expects to enjoy a long-term interest rate of 6%.

The third challenge listed was complicated cross-ownership in the banking system leading to problems for banks in the control of cash flow. This, Thanh said, compounds the problem of bad debt.

The State Bank of Vietnam needs to deal with the situation in which an individual or organisation buys stake in a bank which exceeds the regulated rate, he said, adding that individuals must take responsibility for these violations related to cross-ownership.