"We encourage you to join this (bad debt) market in Vietnam as several investors have been successful in this market," Mr Dung told a group of Australian businesspeople in Sydney during his two-day official visit to Australia, according to a statement on the government's website.

Bad loans now account for around 5 per cent of the total outstanding loans of the local banking system and Vietnam is aiming to bring this ratio down to 3 per cent by the year-end, Mr Dung said.

While foreign investors are currently not barred from buying bad debt in Vietnam, no major deal has been reported so far.

Mr Dung also encouraged Australian companies to invest in mining, energy, agricultural and financial projects in Vietnam.

Speaking to executives of Telstra on the sidelines of the meeting, Mr Dung said Vietnam is moving to privatise several local telecom companies and Telstra is welcome to buy stakes in these companies, including MobiFone, one of the largest mobile carriers in the Southeast Asian country.

Foreign investment has played an important role in Vietnam's economic development. Foreign direct investment accounts for a quarter of Vietnam's total investment, and exports by firms with foreign investment account for over 65 per cent of the country's export revenues.

Mr Dung also met executives of other Australian companies to encourage them to invest in Vietnam, including Rio Tinto, Commonwealth Bank of Australia, Origin Energy, ANZ and Santos.

Dow Jones Newswires - March 18, 2015