Mar 18, 2013

Vietnam - The bad debt panorama: hundreds of millions USD may be lost

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VietNamNet Bridge – International experts have warned that the bad debts, worth hundreds of trillions of dong would still be the big challenge for the Vietnam’s national economy for at least several years.

Most businesses are big debtors

A report by the Steering Committee on Enterprise Renovation and Development of the government office showed that the loss incurred by state owned economic groups and general corporations in 2012 reached VND2,253 billion.

Ten economic groups and general corporations incurred the accumulative loss of VND17,730 billion in total. The total accounts payable of the conglomerates have reached VND1,330 trillion, of which the irrecoverable debt has reached hundreds of trillions of dong.

The collapse of Vinashin, the shipbuilder, alone has dealt a strong blow on the national economy. Experts have estimated that about VND100 trillion will be needed to pay workers, insurance policies and pay debts.

Especially, Vinashin’s bad debts have shaken some commercial banks – the creditors of Vinashin. Habubank is one of them. The bad debt ratio of the bank was 16.06 percent, which included the VND3 trillion loan to Vinashin which is believed to be unrecoverable. Habubank has to pay a heavy price for this, having to merge into the Saigon-Hanoi Bank.

The Vietnam Waterway Construction Corporation (Vinawaco) has been added into the Ministry of Finance’s list of businesses put under the special control for the last many years. Vinawaco’s accumulative loss by 2012 had climbed to VND1 trillion, the ratio of debt on stockholder equity had reached 14.55, or five times higher than the allowed level.

Restructuring proves to be the only way out for Vinawaco for now. However, this would mean that the huge debts would be put on the state’s burden.

Vinalines’ General Director--Nguyen Canh Viet, said though the number of subsidiaries was cut from 87 to 37, and the corporation sold 10 big ships, it still incurred the loss of VND2,439 billion in 2012.

In the cement industry, the Thai Nguyen and Dong Banh Cement Plants, the two subsidiaries of Coma have been cited as the biggest debtors. The latter has stopped operation since March 2012 after incurring the loss of VND197 billion.

The Ministry of Finance had to pay $3.49 million dollars for Dong Banh, and Euro4.25 million for Vinaicon.

Immeasurable consequences

The member of the board of directors of a joint stock bank has admitted that the bad debts have made banks exhausted.

An analysis of Dr. Dinh Tuan Minh from the Hanoi National University showed that the bad debts of state owned economic groups and general corporations amount to 30-35 percent of the total outstanding loans provided to state owned enterprises. The outstanding loans of the 12 state owned economic groups alone reached VND218,740 billion.

Meanwhile, the Ministry of Finance’s plan on restructuring state owned enterprises showed that in 2012, PetroVietnam was the biggest debtor, who borrowed VND72,300 billion. The second biggest debtor was EVN, VND62,800 billion, and the third Vinacomin VND19,600 billion.

The Vietnam Development Bank (VDB) has been found as the lender of most of the bad debts incurred by state owned enterprises. The bank has been lending with the capital raised from issuing stocks and disbursing ODA (official development assistance) capital.

VDB also provided a preferential loan worth VND300 billion to Vinashin at the interest rate of zero percent to help the shipbuilder pay workers. The Electricity of Vietnam has borrowed more than VND5 trillion. The debts of state owned conglomerates alone account for 75-80 percent of total outstanding loans of VDB.

Tien Phong

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