State groups mainly rely on appropriated funds
By Ngoc Lan - The Saigon Times Daily
HANOI – Over a half of the State-run groups and corporations mainly relied on loans and appropriated funds, leading to high debt-to-equity ratios and posing great risks to safety and financial balance, said the State Audit of Vietnam.
The 2010 State-owned enterprise (SOE) and financial-banking organization audit results announced on Wednesday show that many enterprises had high percentages of appropriated capital, overdue debts and arising bad debts.
For example, the ratio of accounts receivable to assets of Truong Son Construction Corporation was 50.88%, Vietnam Waterway Construction Corporation 38%, Construction and Infrastructure Development Corporation 22.49%, and Housing and Urban Development Corporation (HUD) 22.73%.
In addition to having capital appropriated by others, 11 of the 21 State groups and corporations were mainly relying on loans and funds appropriated from others. Some of them had high ratios of accounts payable to equity, and thus they could easily face insecurity and financial imbalance.
Certain enterprises even mobilized and used capital improperly, resulting in severe capital imbalances. Specifically, debt-to-equity ratio stood at four times at HUD, 3.83 times at Electricity of Vietnam (EVN), and 2.15 times at the Vietnam National Coal and Mineral Industries Group (Vinacomin).
The State Audit of Vietnam said SOEs had not-so-high ratios of financial investment to total assets and chartered capital, but most groups and corporations had invested in non-core business sectors, affecting their financial business. Due to poor corporate governance and the impact of the global economic crisis, several enterprises invested inefficiently and incurred losses.
According to the audit results, the middle- and long-term financial investment of the 21 groups and corporations totaled over VND37 trillion as of end-2010.
Non-core business investment of Vinacomin amounted to over VND1.8 trillion, excluding investment in power and energy, equal to 13% of its chartered capital. Meanwhile, the parent firm EVN had invested VND4.5 trillion outside its core business, equivalent to 4.13% of chartered capital, and the figure of the parent Vietnam Cement Industry Corporation (VIECM) was VND634.9 billion, 5.27% of chartered capital.
Despite strong capital appropriation and non-core investment, the profit margins after audit of these SOEs were insignificant. Some even ran into losses.
Vinacomin obtained a profit margin over investment in stock, real estate and finance being 7.94%. The margin of EVN was 7.83%, not counting the VND1.05-trillion loss from investment in telecom.
Vinalines had a profit margin of 8.63%, but the State-run group had not gained any profit from shipbuilding and property although it had been active in these industries for long.
The State Audit of Vietnam detected many irregularities at many State conglomerates, such as late payments of revenues from equitization, exclusion of late payment interests, and increasing chartered capital without approval of the Prime Minister.
The State audit agency remarked State groups and corporations are currently utilizing huge land and natural resources. However, they have yet to be certified to use certain land plots.
Several enterprises improperly used the land fund, developed projects behind schedules or not meeting the zoning plans, and utilized the allocated resources inefficiently, stressed the State Audit of Vietnam.
According to a report of the Ministry of Finance, as of September 2011, SOEs still owed banks more than VND415.3 trillion, or 16.9% of the total outstanding loans. The 12 State economic groups alone were responsible for VND218.7 trillion, accounting for 8.76% of the total credits of the banking system and 52.66% of SOE outstanding loans.