How have the so-called ‘iron fists’ performed after restructuring?

Having been driven onto the right track, unprofitable state-owned economic groups and general corporations, informally called ‘iron fists’, thanks to their important role in the economy, have recovered strongly.

Vinalines, the national shipping firm, was once described as ‘a sinking ship’ as it was bogged down in losses and debts.

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State owned economic groups use big resources

However, a miracle has occurred. According to the State Capital Management Committee (SCMP), its total transportation output in 2019 reached 23 million tons and the total pre-tax profit reached VND266 billion.

In another case, after many ups and downs because of the oil crisis and embezzlement cases, the national oil and gas group PetroVietnam has gained initial success from restructuring.

In 2019, domestic oil exploitation exceeded the yearly production plan by 6.2 percent (11.04 million tons, VND736 trillion in revenue, or 20 percent higher than the yearly target, an increase of 17 percent over 2018).

Having been driven onto the right track, unprofitable state-owned economic groups and general corporations, informally called ‘iron fists’, thanks to their important role in the economy, have recovered strongly.

The Vietnam Cement Corporation (Vicem) has also revived after a lot of hardships.

Prior to 2015, when cement plants mushroomed, Vietnam witnessed an oversupply and a lot of manufacturers incurred big losses. The State had to come forward and pay debts for the corporations, including Song Thao and Ha Long.

After four years of restructuring, Vicem has reported pre-tax total profit of VND14.778 trillion in 2015-2020, or VND2.955 trillion a year, an increase of 2.3 times compared with 2011-2015.

A leader of the enterprise’s Finance Department had once said in the local press that the company had turnover of VND2.714 trillion in 2017, up by 205 percent compared with 2016, and implemented profit was VND1.403 trillion, up by 529 percent.

As for Ha Long Cement, its total assets were VND5.361 trillion before restructuring, payable debts were VND8.029 trillion and accumulative losses VND3.649 trillion. The Ministry of Finance then had to pay Ha Long’s debts to foreign banks, totaling 52.2 million euros.

After becoming a subsidiary of Vicem in 2016, Ha Long was able to pay its debts in 2017 and 2018.

Experts pointed out that the enterprises which dare to apply creative measures and are not afraid of difficulties will be able to ‘reap fruit’.

Experts praised the achievements gained by PetroVietnam and Vicem, and the efforts by their subsidiaries to make a profit and pay debts.

They also commended the efforts by subsidiaries to replace non-renewable input materials (coal, limestone and clay) with waste and industrial sludge, which helps to create circular production chains, both increasing productivity and mitigating pollution.

Ngo Tri Long, a respected economist, also hailed the achievements by state enterprises, which ‘owed money right and left’ in the past, but now can make a profit and maintain average pay of VND13-14 million a month to workers.

Kim Chi

How are SOEs’ outward investment projects performing?

State-owned economic groups had registered 114 outward investment projects as of the end of 2019 with registered capital of $13.8 billion, according to the MInistry of Public Investment.