One of the first “big cheeses” which are determined to withdraw capital from projects that are not in their major business fields is the Electricity of Vietnam Group (EVN). But it seems that capital withdrawal is a must-to-do thing because EVN is in serious shortage of capital and financial unbalance.
EVN is nearly forced to hand over its telecom business (EVN Telecom) to the Military Telecom Group (Viettel). In terms of banking business, EVN has submitted to the State Bank of Vietnam the plan to transfer its 5.3 percent of shares at the ABBank to HDBank.
Recently, EVN’s CEO Pham Le Thanh said that regard to real estate, EVN was seeking partners to transfer its shares at estate firms. Thanh said that EVN had worked out a roadmap in order to completely withdraw its capital from estate, securities, banking and insurance fields.
Even State-owned groups which are able to rapidly withdraw their capital from left-handed business fields still plead many reasons to temporize capital withdrawal. The Vietnam Chemical Group (Vinachem) is an example.
According to the Government Inspectorate, Vinachem contributed VND7.5 billion (around $400,000) to the Vietnam Commercial and Industrial Securities Company (VICS) in 2007. This group was instructed to withdraw capital from VICS in 2009. However, in 2010, the value of Vinachem’s shares at VICS grew three times.
It is likely that Vinachem does not want to withdraw its capital form VICS. Vinachem’s CEO Nguyen Dinh Khng recently told correspondents that at the request of the government, the group has to withdraw capital from left-handed business areas. However, Vinachem has to take careful steps to avoid capital losses, Khang said.
This is a popular argument made by State-owned groups to explain the sluggishness in withdrawing capital from business areas that are not their major fields.
Not only at VICS, Vinachem’s capital at the Vietnam Chemical Finance JS Company is up to 39 percent. Vinachem’s investment in left-handed fields is 30 percent higher than its chartered capital. This group is still fumbling to reduce its capital to the permitted rate.
In late 2011 and early 2012, the ratio of capital invested in left-handed projects at State-owed groups is very high, reports the Government Inspectorate. For instance, the Song Da Group has invested over VND4.2 trillion ($210 million) in left-handed businesses fields while its chartered capital is only VND3.04 trillion ($152 million). Its investment profile includes the Vietnam Investment Fund, Vietcombank Member Fund, etc.
In June 2011, the time the government inspectors conducted inspection at the Song Da Group, though the group had issued a decision on capital withdrawal from left-handed projects, the above projects were defined to be non-lucrative and this group might lose the money.
According to Song Da Group’s financial report 2010, this group invested more than VND6.9 trillion ($345 million) in projects which are not in its major fields, including over VND5.6 trillion in its subsidiaries, VND700 billion in joint venture firms and VND564 billion in other long-term projects, exceeding its chartered capital by VND2.33 trillion.
Viettel, which is assessed to be the most serious and disciplined group among state-owned groups in Vietnam, also has left-handed projects. In August 2009, Viettel bought more than 21.4 million shares of the Vinaconex JS Corporation, worth VND171 billion (around $10 million). However, government inspectors said that actually this was a loan of Viettel to Vinaconex and Vinaconex had to pay interest money of VND7.7 billion ($450,000) to Viettel. Viettel has claimed back its loan but by early 2012, it had not received the interest money.
Viettel’s capital contribution to the Vinaconex-Viettel Urban Development JS Company and the transfer of Thien An-Nghe An Mineral Water Plant are also considered left-handed projects.
With other groups--like the Vietnam Cold and Minerals Group, the Vietnam Oil and Gas Groups, etc. the volume of capital invested in left-handed project is huge. Most of them have planed to withdraw capital from these projects but it is very difficult.
Manh Quan
Business & Investment Opportunities
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