Introduction
Vietnam's public debt is now extremely high and experiencing an upward trend while the growing budgetary deficit and continuous investment is leading to inflation and rising interest rates. This has caused Vietnam’s debt situation to become more serious. In the six years from 2006 to 2012, public debt had increased sharply from 91,757 billion VND (22.7%) to 989,300 billion VND (41.1%) and the public debt to GDP ratio grew significantly from 41.5 % to 55.6%.  However, public debt management (PDM) in Vietnam has been under focus in recent years, marked by the issuance of the Law on Public Debt Management in 2009 which is incomplete and not compatible with international standards. Therefore, improving the legal framework concerning PDM has become an imperative issue in Vietnam.
This paper aims to analyze the situation of PDM in Vietnam, to explore the shortcomings of the present laws, and to suggest some solutions for the management of public debt in the future. In this research, guidelines on the legal framework for PDM laid out by international organizations, as well as the experiences of China is selected as comparative targets to make recommendations for the management of public debt in Vietnam in the future.
This paper is structured as follows: Part 1 will introduce an overview of public debt. Part 2 will review the situation of PDM in Vietnam. Part 3 points out some shortcomings of current laws on PDM in Vietnam, while Part 4 and Part 5 explore the suggestion of international organizations and the experiences of China on setting the legal framework for PDM. Finally, suggestions for improving the laws on PDM in Vietnam will be made in Part 6.
1. Overview of public debt
It is evident that public debt is an inevitable solution to financing a budget deficit and for development investment. From a legal perspective, the definition of “public debt” is crucial because “it has implications for the types of public institutions and instruments that are governed by the requirements of the PDM legal framework.”  However, currently, “there is no universally accepted definition of ‘public debt’ and various jurisdictions define this differently, with varying policy implications.”  Therefore, it is important that the legal framework of a given jurisdiction clarifies the scope of public debt.
In the narrow sense, public debt includes the debt obligations of a central government, local government, and the government guaranteed debts of independent organizations. In most countries, public debts comprise government debts and government guaranteed debts.  In some jurisdictions, public debt also includes debts of local government (such as in Vietnam,  Taiwan,  and Romania ) and debts of state owned enterprises (SoEs) (such as in Macedonia  and Thailand ).
According to international organizations and some countries, “public debt” is defined in a broad sense. The International Monetary Fund (IMF) and the World Bank (WB) often refer to a public debt as a “debt of the general government and in some cases, the debt of the entire public sector”  and the debts that are collected from debt instruments.  In another report, the IMF considers “public debt” as the debt of the entire public sector, “which includes financial and nonfinancial public enterprises and the central bank.”  
This approach is also relatively similar to the notion of public debt in the Debt Management and Financial Analysis System of the United Nations Conference on Trade and Development,  in the Guidance on Definition and Disclosure of Public Debt of the International Organization of Supreme Audit Institutions,  and in some countries such as Mauritius  and Moldova. 
It is undeniable that “[w]hether the broader public sector debt is included or excluded from the scope of application of the legal framework will vary from country to country, depending on the nature of the political and institutional framework.”  In fact, it is not necessarily obligatory for all members of the above international organizations to adhere to these definitions. These definitions are some guidelines on public debt statistics that help researchers, statistical experts, and users of statistical data to properly use data in accordance with their analytic purposes. IMF member countries are encouraged to collect, aggregate, and report on public debt data under the standard definition of IMF to create consistency among statistics, aggregation, and classification, and to allow for comparison of public debt data between countries.
2. The situation of PDM in Vietnam
In fact, Vietnam’s public debt has been increasing sharply for a long time, whereas PDM has only been a focus in recent years, marked by the promulgation of the Public Debt Management Law in 2009. In recent times, the state has issued many legal documents that are part of an important legal base regulating PDM activities. The situation of PDM can be described as follows:
First, all public debts have been paid fully and timely up to now, so Vietnam has not entered into insolvency yet. Public debt to GDP indicators are in line with the objective of the country’s Strategy of Public Debt and External Debt in the 2011-2020 period.  Based on the assessment of the IMF, the WB, and the Asian Development Bank, “Vietnam is at low risk of external debt distress… and total public debt are below vulnerability thresholds,”  contributing to the strengthening of the national credit rating and the reduction in the country’s cost of capital mobilization. However, because the management of public debt may be affected by potential risks, such as interest risk and exchange rate risk, and increasing domestic debt may lead to some negative impacts on the economy, the PDM should be watched carefully.
Second, public debt has been mobilized in various forms and in diverse currencies meeting the need of the additional demand for development investment and the balance of state budget. Many infrastructure projects, poverty reduction programs, job creation projects, programs for environmental and social welfare improvement are financed by funds from public debt sources.  However, the scale of the government bond market scale is still small, with Vietnam at only 14% of GDP and 63% of the bond market scale; therefore, it is difficult for the government to continue to increase the scale of domestic capital mobilization in the coming years. 
Third, the usage of public debts in Vietnam is not reasonable, timely, and efficient. The first reason for this is that “delays in the disbursement of investment capital from the State budget and government bond funds take place quite often,”  especially in the progress of construction in infrastructure projects. This constraint, “together with a lack of financial discipline in public investment and in the operation of SoEs results in scattered investment, waste, loss of investment capital” ; therefore, it has “exposed Vietnam to numerous risks”  in PDM. The second reason is low investment efficiency demonstrated by the Incremental Capital to Output Ratio (ICOR) i.e., the additional capital required to increase one unit of output. The lesser the ICOR, the more efficient is the investment.  In Vietnam, for instance, the ICOR index surged to a high level (more than 8) in 2009 while investment as a whole was 42% of GDP and the growth rate just reached 5%.  This means that Vietnam needed to invest 8 units of capital to gain 1 unit of output.
Fourth, “Vietnam has just only paid attention to mandatory debt management, but not hidden debt management” . Hidden debts are not the liabilities of the government to repay, but they depend on economic and social functions of the state. In fact, hidden debts are unstable, and because they are relatively difficult to estimate, then can create high potential risks for debt sustainability. One famous example of hidden debt in Vietnam is the case of Vietnam Ship Industry Group, a state economic group (hereinafter VINASHIN). “In 2005, Vietnamese government issued US$750 bonds in the international financial market to finance VINASHIN. Moreover, VINASHIN still borrowed at least US$600 millions from foreign banks. This company also got a huge amount of funds, especially credits from state banks, as it required. But, due to the bad management with many crazy investment projects and corruption, in June 2010, its total debt was at least… US$4.6 billions, which were equal to 83% of its total assets.”  When VINASHIN came into bankruptcy, the government had to pump a lot of money into it, leading to a huge burden on the state budget and a negative effect on the public debt sustainability of the country.
Fifth, the information and data on public debt in Vietnam have not been aggregated and publicized sufficiently. In fact, the MoF just publicized information and data on public debt in the Bulletin of Public Debt by the end of 2013. Therefore, it is difficult for the state and the people to supervise and effectively implement the management of public debt.
3. Shortcomings of current laws on PDM in Vietnam
First, there is “the limited understanding of public debt, as a result, incorrect evaluation of Vietnam’s public debt” . The scope of government debt does not include the debts of SoEs, extra-budgetary units/accounts, and social security funds such as Vietnam Bank for Social Policies and Vietnam Development Bank. This is not compatible with the IMF’s suggestion on public debt  and the decisions on the establishment of Vietnam Bank for Social Policies and the Vietnam Development Bank. According to Decision No. 131/2002/QD-TTg, dated October 4, 2002, on the establishment of Vietnam Bank for Social Policies and Decision No. 108/2006/QD-TTg dated May 19, 2006, on the establishment of Vietnam Development Bank, these social security funds are set up in order to implement credit policies for social security and development investment but not for profit purposes. Accordingly, the payment capacity of the Vietnam Development Bank and the Vietnam Bank for Social Policies is guaranteed by the government and they are exempt from paying taxes and other state budget revenues. In fact, these loans are considered government debts because they are mobilized on behalf of the government in order to perform the tasks assigned by the government. Therefore, when the debts of Vietnam Development Bank and Vietnam Bank for Social Policies are not included in government debts, it will be impossible to get accurate information about Vietnam's public debt, making it difficult to control the public debt of the country. In addition, contingent debts, like the debts of SoEs, debts arising from the privatization of the state, and solving the problem of bankruptcy of credit institutions, the expenses for environmental remediation and recovering from natural disasters, etc. have not been noted, leading to high potential risks for public debt sustainability.
Second, Vietnam still lacks instruments to manage and handle with public debt risks, such as interest rate risk, exchange rate risk, etc., as well as the mechanisms and tools for controlling public debt risk. These shortcomings have negatively impacted on the sustainability of public debt and the effectiveness of the management of public debt.
Third, the publicity of public debt via a MoF bulletin has not been regulated in detail by the law. Therefore, much important information on public debt, such as information on local administration debts, contingent debts, and the use and repayment of all kinds of public debt, has not been mentioned in the public debt bulletin. As a consequence, the reduced transparency of public debt could reduce the effectiveness of the management of pubic debt and the mechanism for early warnings. In the meantime, it would let international entities and foreign countries continue to calculate the data on the public debt of Vietnam in their own ways, causing inconsistency of Vietnam's public debt information and reduction of the national credit rating and preventing the international economic integration of the country.
Fourth, the law regulates the audit of programs and projects using loans from public debt but does not specifically stipulate the tasks and responsibilities of auditors in the management of public debt. The pending regulations on these issues can lead to unclear and inaccurate data on public debt, abuse of the debt management agency, and serious affects to national financial security.
Fifth, there is no regulation on sanctions for non-compliance of debt managers, leading to confusion or delay in publicizing data on public debt or the abuse of power of competent authorities, reducing of the effectiveness in the law implementation.