State economic sector’s debts revealed
HANOI – Recently revealed statistics show that several State economic groups were in hazardous financial condition in the recent past due to loss-making businesses and inefficient investments.
Apart from the debt-laden Vietnam Shipbuilding Industry Group (Vinashin), the most typical example should be Vietnam Electricity (EVN) with the ratio of debt to equity at 4.22 as of end-2010, said a report of State Audit of Vietnam. The debt-to-equity ratio is considered alarming when exceeding 3, under the Government’s Decree 9 issued on February 5, 2009.
State Audit of Vietnam stressed in its report: “The financial situation of EVN is difficult and insecure.”
Still, other State economic groups used to far exceed the margin of safety.
According to the report of the Ministry of Finance in December last year, there are 30 State groups and corporations with a debt-to-equity ratio above 3. Among those, seven State enterprises have the figures exceeding 10, nine firms ranging from 5 to 10 and 14 firms from 3 to 5.
As of end-2010, the total liabilities of the State groups and corporations have amounted to over VND1,088 trillion, equivalent to some US$50 billion, or 1.67 times higher than the total equity of some VND650 trillion, said the finance ministry.
The ministry said the accumulated losses of the State businesses had reached VND26 trillion as of last year’s end. Still, the report did not reveal the enterprises with an alarming ratio of debt to equity.
However, the report highlighted EVN, Vietnam National Shipping Lines (Vinalines) and Vietnam National Textile and Garment Group (Vinatex) as the worst loss-making concerns. The loss-making enterprises also include Vietnam Housing and Urban Development Group, Civil Engineering Construction Corporation No.1 (Cienco 1), Vietnam Urban and Industrial Zone Development Investment Corporation, Military Petroleum Company and Vietnam National Tea Corporation.
Speaking to the Daily, Pham Viet Muon, deputy chief of the Steering Committee for State-owned Enterprise Reform and Development under the Government Office, stressed the low business efficiency of the State sector.
“Overall, the business and production efficiency of State-owned enterprises is not commensurate with allocated resources,” he said.
Vo Tri Thanh, vice president of the Central Institute for Economic Management (CIEM), suggested the Government should promptly update the debt-to-equity ratios of the State economic groups. He cited the case of EVN, whose ratio of debt to equity jumped from the safe level of 2.69 to 4.22 within a year as reported.
According to State Audit of Vietnam, as of end-2011, the liabilities of EVN have totaled over VND239.7 trillion, in which short-term debts are worth nearly VND65.5 trillion, or 27%, and long-term ones worth some VND174.2 trillion. Therefore, the Government audit agency said EVN’s business was strongly dependent on loans and payable arrears.
As of end-2010, EVN still owed Vietnam National Oil and Gas Group (PetroVietnam) some VND4.01 trillion and Vietnam Coal and Mineral Industries Group (Vinacomin) VND855 billion. As of end-June 2011, when the audit was done, the figures shot up to VND8.86 trillion and VND1.21 trillion respectively.
According to the report of the Ministry of Trade and Industry, the State economic sector accounts for 60% of the bank credit, contradicting the figure of merely 16% informed by Governor Nguyen Van Binh of the State Bank of Vietnam at a seminar held by Nhan Dan newspaper.
Transparent data on the performance of Vietnam’s leading State economic groups have always been demanded at multiple forums, especially at the National Assembly. There is the requirement that State groups must publicize the figures like listed securities firms do, but such a requirement so far has not been adhered to.
By Tu Hoang - The Saigon Times Daily - January 4, 2012