Vietnam - State companies found with massive losses

Audit results and reports from ministries have revealed that many state-owned enterprises (SOEs) have been, or still are, in alarming financial states.

These SOEs have repeatedly incurred steep losses and debts because of poor investments, the Saigon Times Online reported.

Besides the already infamous debt-stricken Vinashin, the Electricity Group of Vietnam (EVN) is another typical example.

By the end of 2010, the debt to equity ratio of this company was 4.22, according to the State Audit of Vietnam (SAV).

As stipulated by the government, an enterprise is considered to be in a dangerous state if the ratio exceeds 3.

“EVN’s financial state is in difficulty, and unsafe,” said SAV’s report.

Meanwhile, the ratios of other SOEs even far exceeded the maximum rate.

According to a report issued last December by the Ministry of Finance, there are currently 30 state-run groups and corporations whose debt-to-equity ratio surpasses the 3 threshold. Of these, 7 enterprises have ratios of over 10.

By the end of 2010, the total debts of these SOEs amounted to VND1,088.2 trillion, or US$52.2 billion, 1.67 times higher than their total equities, which were VND653.16 trillion.

The ministry also said that these SOEs incurred a total loss of VND26 trillion, but didn’t name the firms that had alarming debt-to-equity ratios.

However, the ministry’s report mentioned certain loss-stricken enterprises, including EVN, Vinalines, CIENCO 1, IDICO, Vinatea, Housing and Urban Development Holdings, and Military Petroleum Co.

“In general, the competitiveness and business effectiveness of SOEs are not adequate to the resources invested in them,” Pham Viet Muon, deputy head of the Steering Board for Enterprise Reform and Development under the Government Office, told the Saigon Times Online.

Doctor Vo Tri Thanh from the Central Institute for Economic Management urged the government to update SOEs’ debt-to-equity ratios, since they have changed dramatically in just a short time.

“For example, as recently as 2009, EVN still posted a safe ratio of 2.69, but soon drowned in the alarming state just a year later,” Thanh said.

According to SAV, EVN’s debts topped $11.5 billion by the end of 2010, with long-term liabilities accounting for 73 percent of the total debts. This means EVN’s operation has relied mainly on bank loans and appreciated capital.

According to a report conducted by the Ministry of Planning and Investment, the public economic sector accounts for as much as 60 percent of total bank credits.

However, in a meeting last December, the State Bank of Vietnam’s Governor Nguyen Van Binh said the ratio was only 16 percent.

With such inconsistent statistics from the two institutions, many have called for more transparency about the financial states of the SOEs.

The call has been repeatedly raised at many National Assembly meetings, but has not been heard.

TUOITRENEWS

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