The Ministry of Finance (MOF), after analyzing the 2019 finance reports of foreign invested enterprises (FIEs), has found a contrast in the business performance of the enterprises.
Big FIEs: big losses, low tax payments
FIEs' exports in 2015-2019 (billion dollar)
Formosa Ha Tinh had total assets of VND286 trillion on December 31, 2019, with accounts payable of VND186 trillion, including VND64.3 trillion worth of short-term debts and VND121 trillion worth of long-term debts. The enterprise had accumulated losses of VND25.3 trillion.
Though the company had revenue of VND72 trillion in 2019, an increase of 11.7 percent over 2018, it still took a loss of VND11.5 trillion, which was 4.2 times higher than the loss of VND2.727 trillion in 2018.
Formosa Ha Tinh paid only VND51.6 billion in taxes in 2019 as it was enjoying tax incentives.
According to MOF, the company’s short-term debts exceeded its short-term assets (VND25.4 trillion), leading to the low current ratio of 0.6 (which measures a company's ability to pay short-term obligations or those due within one year).
This shows that the enterprise used short-term capital for long-term investments.
In addition, inventories accounted for a large proportion of short-term assets and short-term debts exceeded short-term assets, which both lead to a low quick ratio of 0.19x (which shows a company’s short-term liquidity position and measures its ability to meet short-term obligations with its most liquid assets).
Payment ratios are all at low levels, which shows the company is in difficulties debt payment.
Problems have also been found at another steel manufacturing company – Posco Yamoto Vina in Ba Ria-Vung Tau province. The accumulated loss of the company has reached VND8.9 trillion. In 2019, it reported a loss of VND2.78 trillion, higher than the VND1.094 trillion of the year before.
As such, in 2018 and 2019, the two largest FIEs in the steel and metal production sector, had unhealthy financial situation, while business performance results decreased and the contributions to the state budget were ‘limited’.
MOF noted that though iron and steel prices in the world market fell in the two years, the total revenue of the two enterprises still increased from VND77.456 trillion to VND82.741 trillion, while the payment to the state budget decreased from VND101 billion to VND92.6 billion.
|MOF noted that though iron and steel prices in the world market fell in the two years, the total revenue of the two enterprises still increased from VND77.456 trillion to VND82.741 trillion, while the payment to the state budget decreased from VND101 billion to VND92.6 billion.|
The contributions to the state budget were not commensurate with the incentives offered to the two large companies.
Electronics manufacturers thrive
According to MOF, Samsung Electronics Vietnam (SEV Bac Ninh) got the total revenue of VND447 trillion in 2019, a slight decrease compared with the VND452 trillion of 2018. Its post-tax profit was VND35 trillion and it paid VND2.85 trillion in taxes.
As for SEV Thai Nguyen, the total revenue in 2019 was VND657.6 trillion, higher than the VND597 trillion of 2018. Its post-tax profit was VND46 trillion in 2019 and it paid VND2.079 trillion in taxes, higher than the VND1.268 trillion in 2018.
SEV Bac Ninh and SEV Thai Nguyen are the two largest out of 967 enterprises belonging to the field of electronic components, computer and computer peripherals, and optical equipment with revenue accounting for 48 percent of total turnover of the field.
Both of them were highly profitable.
In the field of electricity generation and distribution, MOF analysed the financial situation of Vinh Tan 1 Co Ltd and AES Mong Duong Electricity Co Ltd. These are both BOT (build, operation, transfer) projects.
Vinh Tan 1 became operational in July 2018 and it has an operational duration of 25 years. In 2019, it had revenue of VND15.2 trillion and pre-tax profit of VND3.6 trillion. It paid VND508 billion in taxes.
Meanwhile, AES Mong Duong has been operational since March 2015. Its liabilities are VND25.9 trillion dong, while the debt to equity ratio is 2.51 times, or four times lower than the maximum level specified in BOT contract. The current ratio is 1.13, while the quick ratio is 0.91.
MOF asserted that the financial situation and business results of these two enterprises are good and their profitability is higher than the average level of the enterprises in the same sector.
The Ministry of Finance (MOF) said the 2019 finance reports of foreign invested enterprises (FIEs) showed that 45 percent of the enterprises had reported losses.
The solution to develop the ICT industry and ease reliance on foreign invested enterprises (FIEs) is developing more ‘Make in Vietnam’ firms.