Vinashin Bailout: Vietnam Tries Everything But a Free Press
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Vinashin Bailout: Vietnam Tries Everything But a Free Press

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The boffins in Hanoi have been busy. Mending their country’s mangled financial fences is a considerable task for the minders of a centrally planned economy controlled by a one-party state with pretensions of being a communist vanguard.

Of strategic concern is Vinashin, the national shipbuilding company and once the pride of Vietnam’s state-owned enterprises, which buckled under $4 billion in debt and could still cost Prime Minister Nguyen Tan Dung his job.

Vietnam will offer $626 million of government-guaranteed bonds at the Singapore Stock Exchange to help the shipbuilder repay foreign creditors stung by the company’s addiction to debt. The company is also being rebranded and will in the future be known Shipbuilding Industry Corporation (SBIC).

SBIC will run eight yards focused on shipbuilding, repair and conversions and be charged with the restructuring of 234 companies that Vinashin controls through asset sales, debt for equity swaps and mergers. The task is massive.

But players in the markets should be forgiven for wondering if the latest moves are little more than a game of musical chairs on the decks of the Titanic. Recent figures from the Finance Ministry show two-thirds of local enterprises have reported losses in business this year alone.

“Enterprises wish that the taxman [would] set out a roadmap on administrative reform to create a more liberal business environment in the process of international economic integration,” said Hoang Quang Phong of the Vietnam Chamber of Commerce and Industry (VCCI).

The problem for Phong and the prime minister, whose connections to corrupt businessmen have been well-documented, is that privately run business with less government intervention to worry about have fared much better.

They tend to do even better in other countries where the press is free to report on the economy and business unencumbered by government gatekeepers, who seem to spend more time putting the critics in jail than on the profit and loss accounts of heavily state-subsidized industries.

Instead of criticism the Vietnamese government would prefer a simple applause.

Other recent initiatives include ordering Vietnam Airlines to raise cash through the forced sale of about 24 million shares in Techcombank as part of a recent state directive telling the airline to divest from its non-core businesses.

The central bank has also unveiled a draft decree which will prohibit non-Vietnamese people from opening bank savings accounts in foreign currencies to curb foreigners from depositing their offshore currencies in local banks to take advantage of Vietnam's high interest rates.

The move will circumvent laws that were introduced as part of a broader plan for Vietnam’s entry into the World Trade Organization (WTO). Perhaps those rules don’t apply anymore.

But more disturbing is their reasoning behind the draft decree, because it “exerts pressures on the foreign exchange market, especially at a time when it is strained.”

Foreign exchange markets simply reflect the state of an economy, which in Vietnam is a difficult call because honest reporters are locked-up and thinned-skinned politicians who created the fiscal mess in the first place seem to think they are the only ones who should merit an opinion or are qualified to act.

To suggest anything else – well that just wouldn’t be right under Vietnamese law and might land one in jail.

Luke Hunt can be followed on Twitter at @lukeanthonyhunt.

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