VietNamNet Bridge – The serious diseases suffered by Vietnamese
businesses over the last decade still have not been treated well.
Vo Tri Thanh, Deputy Head of the
Central Institute of Economics Management (CIEM), has warned about the
imbalance of the capital structure of Vietnamese businesses. He said while
foreign businesses use up to 30 percent of their profits for re-investment,
Vietnamese enterprises have been totally relying on bank loans.
Nguyen Xuan Thanh from Fulbright
Economics Teaching Program agrees, saying that the ratio of accounts payable on
stockholder equity of Vietnamese listed businesses is 1.53, much higher than
that in the US (1.2) and China (1.06).
The figures have been found from
survey on 647 Vietnamese listed companies in the second quarter of 2012, not
including banks and finance companies.
Economists first gave warnings
about the enterprises’ overly high percentage of borrowed money in the total
working capital in early 2000s. The “financial lever” proves to be a double
edge knife for businesses.
And when Vietnam has to face
crisis, the dark side of the “financial lever” has bared itself: the overly
high bank loan interest rates plus stagnant production both have pushed a lot
of businesses, including the well known Binh An Seafood Company, into the verge
of bankruptcy.
Thanh has found that real estate,
power and material enterprises prove to be the ones which have the highest ratios
of debts on stockholder equity, while farm produce processing and consumer
goods enterprises have the lowest ratios.
This is a clear proof that shows
the last development stage of the Vietnam’s national economy which was
associated with the “real estate investment wave”.
Not only private businesses,
state owned enterprises have also been heavily indebted with the ratio of debt
on stockholder equity at 1.71, according to the Ministry of Finance.
Especially, conglomerates and
general corporations have been found as the enterprises with the highest ratios
of debts on stockholder equity. The ratios are 4.26 for the Electricity of
Vietnam, 8.85 percent for the Song Da Crporation, 6.36 percent for HUD Group,
6.29 percent for Petrolimex (petroleum importer and distributor) and 4.27
percent for Vinalines (shipping corporation).
In order to satisfy the
enterprises’ increasingly high demand for capital, commercial banks have been
unceasingly expanding their networks and increasing chartered capital.
By the end of 2011, the total
chartered capital of the banking system had increased by nine times over the
end of 2004. The ratio of outstanding loans on GDP in Vietnam has also been
increasing from 40 percent in 2000s to 130 percent by 2010 – a galloping
increase if compared with that of the Philippines, Indonesia, Thailand and
Malaysia.
The easy access to bank loans
then encouraged domestic enterprises to push up their investment in many
business fields, including the risky ones such as real estate or stocks. As a
result, the businesses have sunk when the real estate and stock markets got
frozen.
Once businesses fell into
insolvency, banks have also suffered, because they have to face irrecoverable
loans. The figures about the bad debt ratio of the Vietnamese banking system
vary. However, Thanh believes that the bad debts have been “hidden” by banks to
make their finance reports polished, and that the actual bad debt ratios are
higher than the reported figures.
VOV Online on August 21 reported
that Vietnam’s bad debt ratio is 8.6-10 percent, which, according to Governor
of the State Bank Nguyen Van Binh, is still outside of the danger list, but is
really alarming.
Compiled by C. V
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