VietNamNet Bridge – The Ministry of Finance (MOF) is planning to reduce the investments of State owned enterprises (SOEs) in non-core business fields, to 15 percent from the current 30 percent. However, 15 percent is still believed to be overly high, which will not help cut down the risky investments in the fields in which SOEs do not have advantages.

Thirteen SOEs have been found as making heavy investments in the finance and banking sector, which is believed to be unfamiliar and risky to them, with the total investment capital of 10,700 billion dong. Thirteen other SOEs have been found as injecting 1300 billion dong in securities, and eight have poured money into the real estate sector, totaling 3754 billion dong.

Enterprises between evil and deep blue sea

Representatives of enterprises complain that lacking capital is now the biggest problem they are facing. Le Tien Truong, Deputy General Director of Vinatex, said that it has been finding it to arrange capital for investment projects since 2010, which has been hindering the implementation of the plan to increase the localization ratio of its products to 60 percent by 2015.

It is clear that a lot of SOEs are lacking capital to make investment in their main business fields. However, they still pour money into the business fields which are unfamiliar to them, such as finance and banking, insurance or real estate.

The Electricity of Vietnam (EVN) is considered the one that is incurring the debt of 11,669 billion dong, according to official sources, having become the biggest debtor among state owned general corporations. Experts believe that the actual debt would be even higher, since the power group is still owing money to other state owned economic groups, including PetroVietnam and Vinacomin.

However, while EVN does not money to pay debts, it still has money to make investment in a lot of projects in real estate, securities and hotel sectors. To date, EVN still has the contributed capital worth of up to 2100 billion dong at the projects, which is equal to 3 percent of the chartered capital.

PetroVietnam has also been well known as a big investor, who has thrown big money into non-core business fields. Though the oil and gas group has withdrawn its capital from many projects, the investment capital in the business fields remains very high of up to trillions of dong. To date, PetroVietnam still tops the list of the SOEs which have big investments in non-core business fields: 6690 billion dong, or 3.76 percent of the chartered capital.

Vinacomin, the coal and mineral industries group, is trying to withdraw its capital from four enterprises, including an insurance company (50 billion dong, 10 percent of capital), the Long Thanh international airport development company (7.5 billion dong, 8 percent), the Hai Ha Economic Zone Development Company (47.8 billion dong, 10 percent), and the BIDV Expressway Development Company (10.5 billion dong, 7 percent).

A senior executive of Vinacomin said that it is now not difficult to transfer stakes, but it is foreseeable that the profit to be gained from the share transfer would not be big in the context of the current gloomy stock market.

He said that even when Vinacomin successfully withdraws capital from all the projects, the capital to be taken back would make nothing if compared to the huge capital of 1.5-2 billion dong a year that Vinacomin needs.

To date, Vinacomin has invested 600 billion dong in other business fields, or 2.4 percent of its chartered capital.

MOF makes a wrong decision?

In an effort to restrict SOEs’ investments in non-core investment fields which may bring risks, MOF is drafting a legal document on the issue, planning to reduce the allowed investment proportion of SOEs from 30 percent of their total investment capital to 15 percent.

However, economists believe that MOF would make a wrong move if doing so, because 15 percent is still an overly high ceiling for enterprises.

Nguyen Dinh Cung, Deputy Head of the Central Institute for Economic Management (CIEM) said that once the government requests state owned economic groups and general corporations not to make investments in non-core investment fields, they must not pour even one dong to the fields. Why does MOF still allow them to invest 15 percent?

Cung went on to say that if MOF does not set up strict regulations to stop investments in unfamiliar business fields, the situation may be even worse. At this moment, a lot of SOEs have been falling into big difficulties even though their investments are not too big.

Source: DDDN