Jan 9, 2013

Vietnam - FIEs continue to dominate Vietnamese markets

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Foreign invevsted enterprises are still the most profitable, according to Vietnam Report Joint Stock Company's Top 500 Largest Enterprises in 2012 (VNR500).

According to the fourth economic report by Vietnam Report, foreign direct investment (FDI) enterprises gain a VND3.9 profit out of every VND10 of investment, while state-owned firms only achieved VND1.6 and the rate for domestic private companies were at VND1.5.

According to the report, not only were FDI firms provided with more favourable conditions by the government, but they also had superior management.

However, Vietnam Report also concluded that FDI firms need to make more of a contribution to society by improving working and living conditions, as opposed to cutting back.

The most profitable industries named in the report were telecom, chemical, mechanics, forestry and agriculture.

The telecom industry reaped VND4.6 in profit for every VND10 invested, while the electricity industry was unprofitable. The transportation, construction, real estate and publishing sectors also showed little gain.

The liquidity crisis for banks in 2011 put many enterprises at risk, especially in 2012, as the rate of bad debt reached 12 per cent. However Vietnam Report said that most FDI firms were not subject to that risk.

Because their average loan to assets ratio was 40 per cent, even if they did not generate profits, most were still able to fulfill their financial obligations.

The average ratio for state-owned enterprises was 70 per cent, while with private companies it was 80 per cent. These firms faced higher risk of default on debts.

The ranking showed that the loan to asset ratio of 40 per cent of enterprises in the VNR500 were higher than the rate of 60 per cent, which is considered "safe".


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