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How swelling debts give rise to a new type of politics in Vietnam

Viet-Ha T. Nguyen, Hong Kong Nguyen-To, Thu Trang Vuong, Tung Ho and Quan-Hoang Vuong
Authors registered in the RePEc Author Service: Thu-Trang Vuong and Quan-Hoang Vuong

No 18-026, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Vietnam has seen fast-rising debts, both domestic and external, in recent years. This paperreviews the literature on credit market in Vietnam, providing an up-to-date take on the domesticlending and borrowing landscape. The study highlights the strong demand for credit in both therural and urban areas, the ubiquity of informal lenders, the recent popularity of consumer financecompanies, as well as the government’s attempts to rein in its swelling public debt. Given thehigh level of borrowing, which is fueled by consumerism and geopolitics, it is inevitable that theamount of debt will soon be higher than the saving of the borrowers. Unlike the conventionalwisdom that creditors have more bargaining power over the borrowers, we suggest that—albeitlacking a quantitative estimation—when the debts pile up so high that the borrowers could notrepay, the power dynamics may reverse. In this new politics of debt, the lenders fear to lose themoney’s worth and continue to lend and feed the insolvent debtors. The result is a toxic lending/borrowing market and profound lessons, from which the developing world could learn.

Keywords: debt; credit; financial system; Vietnam; consumerism; geopolitics; political economy; government finance (search for similar items in EconPapers)
JEL-codes: E26 E44 E51 F34 H63 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2018-08-20
New Economics Papers: this item is included in nep-mac, nep-sea and nep-tra
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