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

Author

Listed:
  • Viet-Ha T. Nguyen
  • Hong Kong Nguyen-To
  • Thu Trang Vuong
  • Manh Tung Ho
  • Quan-Hoang Vuong

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.

Suggested Citation

  • Viet-Ha T. Nguyen & Hong Kong Nguyen-To & Thu Trang Vuong & Manh Tung Ho & Quan-Hoang Vuong, 2018. "How swelling debts give rise to a new type of politics in Vietnam," Working Papers CEB 18-026, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/276130
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    References listed on IDEAS

    as
    1. John Rand, 2007. "‘Credit Constraints and Determinants of the Cost of Capital in Vietnamese Manufacturing’," Small Business Economics, Springer, vol. 29(1), pages 1-13, June.
    2. repec:pal:palcom:v:4:y:2018:i:1:d:10.1057_s41599-018-0127-3 is not listed on IDEAS
    3. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
    4. Quan-Hoang Vuong & Manh Tung Ho & Viet-Phuong La & Van Nhue Dam & Bui Quang Khiem & Nghiem Phu Kien Cuong & Thu-Trang Vuong & Hong Kong Nguyen & Ha Viet Nguyen & Hiep-Hung Pham & Nancy K. Napier, 2018. ""Cultural additivity" and how the values and norms of Confucianism, Buddhism, and Taoism co-exist, interact, and influence Vietnamese society: A Bayesian analysis of long-standing folktales,," Working Papers CEB 18-015, ULB -- Universite Libre de Bruxelles.
    5. Nguyen Van Thang & Nick Freeman, 2009. "State-owned enterprises in Vietnam: are they 'crowding out' the private sector?," Post-Communist Economies, Taylor & Francis Journals, vol. 21(2), pages 227-247.
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    7. Dollar David, 1994. "Macroeconomic Management and the Transition to the Market in Vietnam," Journal of Comparative Economics, Elsevier, vol. 18(3), pages 357-375, June.
    8. Khoi, Phan Dinh & Gan, Christopher & Nartea, Gilbert V. & Cohen, David A., 2013. "Formal and informal rural credit in the Mekong River Delta of Vietnam: Interaction and accessibility," Journal of Asian Economics, Elsevier, vol. 26(C), pages 1-13.
    9. Danielle Labbé & Clement Musil, 2014. "Periurban Land Redevelopment in Vietnam under Market Socialism," Urban Studies, Urban Studies Journal Limited, vol. 51(6), pages 1146-1161, May.
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    More about this item

    Keywords

    debt; credit; financial system; Vietnam; consumerism; geopolitics; political economy; government finance;

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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