VietNamNet Bridge - The business performance of state-owned enterprises is often unclear because of lax management. At many large companies, problems were discovered only after the firms had incurred losses of trillions of dong.


{keywords}

VRG has incurred the loss of trillions of VND




The arrest of the former president of the Vietnam Rubber Group (VRG) and four former senior executives of its subsidiaries has lengthened the list of SOE business scandals and raised public concern about economic efficiency and the role of SOEs (state owned enterprises) in the national economy.

VRG is not the only SOE which has incurred the loss of trillions of dong. The industrial and trade sector has 12 investment projects incurring big losses. 

The government has been applying measures to settle problems as soon as possible. 

However, analysts say basic problems will be handled by the end of 2018 and all existing problems will not be cleared before 2020.

The list of 12 loss makers includes the Vietnam Chemicals Corporation (Vinachem). 

In early 2017, the chemicals manufacturer asked the government to pay $125 million.  This was part of a loan provided by China Eximbank to Vinachem to fund the unprofitable Ninh Binh fertilizer plant.

However, MOF (Ministry of Finance) urged the government to refuse the debt payment for Vinachem because Vinachem had not made efforts to find solutions for debt payment.

The arrest of the former president of the Vietnam Rubber Group (VRG) and four former senior executives of its subsidiaries has lengthened the list of SOE business scandals and raised public concern about economic efficiency and the role of SOEs

A report from MOF shows that the state budget has had to pay debts for a number of SOEs. 

These include Vinashin (ship builder), Phuong Nam Paper, Dong Banh, Tam Diep, Hoang Mai and Ha Long cement projects. 

The government acted as a guarantor for investors to borrow foreign capital and now has to pay the debts.

According to GSO, SOEs held 32 percent of total business capital and 39 percent of fixed assets and long-term investments by 2016. 

However, the sector creates only 24 percent of revenue, less than 20 percent of industrial production, and holds a small proportion in domestic trade and farm and seafood produce.

Economists said that SOEs are subject to very lax management. No one knows where the state’s capital flows, and no one can send alerts about risks. 

In most cases, SOEs’ bad business performances were discovered only after they had incurred trillions of dong in losses.

A report from CIEM (Central Institute of Economic Management) about SOE equitization pointed out that lack of transparency and information is a big problem. 

Only 241 out of 620 SOEs publicly expose their information, while the other 60 percent do not make public their operation and equitization plans.

CIEM’s head Nguyen Dinh Cung said that total assets held by SOEs is VND5,000 trillion. If SOE efficiency can be improved by one percentage point, assets would create additional value of $2.5 billion.


RELATED NEWS

SOE bosses – from hot seats to prison

Foreign investors still ignore SOE equitisation


Mai Thanh