VietNamNet Bridge - One of the hottest topics on newspapers
these days is related to the tragic situation of moguls.
Phuoc Sang, a famous film
producer and businessman, was accused by his friend, who is also a businessman,
of borrowing him several hundreds of thousands of USD but neglecting to pay
back. Sang explained to newspapers that his money is stuck in real estate so he
cannot pay the debt right now.
Some patrons of football teams,
who are famous moguls, because of business difficulties, claimed to stop
investing in football. Some of them are accused of not paying salary for
players for several months. Previously, these bosses spent millions of USD each
year in their football teams.
In fact, these are not isolated
stories because tens of thousands of businesses have gone bankrupt in Vietnam
this year. However, these entrepreneurs had no connection to football or the
showbiz, so they were neglected.
Real estate "iceberg" crushes moguls
Five years ago, Hoang was known
as a very rich businessman. His started business with mechanical products. His
products used to be sold at home and abroad.
That day, Hoang was the “dream”
and “model” of many people because at the age of 40, he had assets worth dozens
of million USD.
When Bentleys were still quite
rare in Hanoi, Hoang bought this supercar, which was priced nearly a million
USD. An employee of Hoang said that every Lunar New Year, Hoang’s family
traveled abroad, to Asia, Europe, etc..
It would have nothing to say if
Hoang did not invest in real estate. If he only focused on one or two projects,
he could have earned a lot of money because in 2008 - 2009, when the real
estate market was at the top.
But perhaps he was too confident
in his ability, so Hoang continued to invest in a dozen of real estate projects
in Cau Giay, Ha Dong, Hoang Mai, Thanh Xuan districts. He also set up an
industrial park project in of several hundreds of hectares in Hanoi’s suburbs.
With a lot of projects, Hoang’s
capital of a few hundred billion dong was not enough. He had to mobilize
capital from people who wished to buy an apartment and from secondary
investors. More clearly, he sold apartments on paper through the so-called
"capital contribution contracts" or "loan contracts," and
the mortgaged property were his projects, which were not approved or
implemented yet.
It would be no problem in 2009 –
2010, the golden time of the real estate market. But when the estate market
dropped since then and is frozen now, Hoang’s projects are idle. Customers and
secondary investors turned to ask for their money back. Hoang had to sell his
Bentley and assets to pay debts. His office was moved from Hanoi’s center to
the suburbs. Being hunted by creditors, how long can this boss sustain?
But, in the real estate business,
Hoang’s case is not special.
In the golden time of the real
estate market, only with a land relocation decision, the estate investor could
easily earn a lot of money. Therefore, many estate firms were established.
As a former official of a
State-owned construction firm, who earned a lot of money from the stock market
during its golden time in 2007 – 2008, Van and several friends opened a real
estate joint stock company.
These people were confident that
they would be successful because they were experts of construction who were
very familiar with administrative procedures. The first project was a joint
venture with another company to build condominiums.
At first, Van was fairly
confident that the company would become famous very soon because he planned a
very detailed strategy: after successfully implementing several projects, they
would issue shares on the stock market to make big money, as he used to do at
his previous company.
But the real estate market has
been frozen for almost two years, making all the plans of Van still only on
paper.
Not investing in real estate
investments, Mr. Dong, director of a business in the field of export- import
and services, is also trying to find ways to survive.
As a senior expert in import and
export, more than 20 years ago Dong traveled across Eastern Europe to purchase
batches of trucks to import into Vietnam. After leaving his state-owned
company, Dong immediately opened a joint-stock commercial services and
import-export company.
His company makes everything from
airline tickets, car import, tourism to labor export. A few years ago, when the
import of cars was thriving, each month he imported 10 - 20 expensive cars from
available Japan and the Middle East.
That day, he rented the whole
floor of a central building which was the most expensive in Hanoi to base his
headquarters. The director always looked fresh, in chic clothes and sleek hair,
drove a Lexus car like a diplomat.
Yet, earlier this year, after
several times of narrowing his office, Dong he finally had to move his office
to 10km far from the center. Not long ago, seeing Dong, he said he had just
gone abroad to find a contract. "In the hard times, the director must go
to seek contracts alone. I’ve fired some employees." It is said that he
sold his Lexus and borrowed a lot of money from his friends and banks.
Production and business are in
difficulty while businesses had to bear high interest rates for a long time. As
a result, tens of thousands of companies have been dissolved. At a garment
company, which previously exported products to Europe and employed a few
hundreds of workers, there was only the director and a gate guard. Talking
about business, the director said he had to suspend workers because the firm
did not have customers.
Bosses go to jail because of debts
There are businessmen who became
offenders of fraud. The case of Mr. Pham Van Thu, chairman and CEO of Thai Son
Company in Hai Phong is an example.
In early August, the police
arrested Thu for "fraud and appropriating property" related to bank
loans. His son - Pham Hai Thanh, former CEO of Thai Son, Duong Hoang Son,
former Director of Thanh Son Steel Company were also prosecuted for the same
crimes.
Getting rich from dismantling old
ships, Thu formed Thai Son Co. in 1995, trading in capital goods, mechanical
products, electrical appliances, steel, waste, water and land vehicles. In
early 2000, thanks to the “fever” for steel, Thuy became a "giant" in
the port city of Haiphong.
However, in 2010, when the old
ship dismantling industry, the steel industry and the ship building industry
began showing signs of going down, factories and their equipment which were
built and purchased by short-term loans became a burden for Thu. To maintain
these plants, especially shipyards and steel factories, Thu joined Pham Hai
Thanh and Duong Hoang Son borrowed banking loans to import iron and steel, then
occupied the capital in order to take money to maintain the operation of their
plants and to cover short-term debts. The amount of short-term loans and
commercial loans reached more than VND1 trillion ($50 million).
By August 2011, 13 banks ranked
Thai Son Ltd. and its subsidiaries in the form of "bad debt" and
stopped lending them.
However, during the debt recovery
process, banks discovered that they were cheated because most of the credit
agreements Thai Son Company and its subsidiaries were based on virtual assets.
Even with the same assets, Thu mortgaged at several banks. So until Thu and his
son were arrested, they withdrew over VND1 trillion from banks.
Compiled by Tran Cham
Business & Investment Opportunities
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