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Many big guys report big losses, causing big worries
The information that Agribank Financial Leasing Company No.2, a subsidiary of the state owned Vietnam Bank for Agriculture and Rural Development, had a loss of 3 trillion dong in 2009, has startled many. However, AFLC2 is not the only state owned enterprises found in making big losses.
AFLC2 and the huge loss
After finishing the auditing of 2009 finance reports, the State Audit of Vietnam (SAV) discovered a lot of problems at the Agribank’s subsidiary. Besides the huge loss of three trillion dong in 2009, the amount which represents more than eight times its chartered capital, the company may make another loss in the financial leasing deal worth nearly 4600 billion dong.
The inspectors have also reported various other violations by the company. AFLC2 accepted deposits of more than 1.3 trillion dong at an interest rate of 17.5 percent, which is higher than its parent Agribank’s interest rate cap.
Its office in the Binh Duong Province bought a 250-ton crane for 65 billion dong from a private company that had bought it just a week earlier for exactly half the price.
In fact, AFLC2 reportedly made losses many years ago, and the loss was discovered in 2007 already. However, the parent group – Agribank, still continues pumping more capital to the unprofitable company.
EVN incurs heavy losses and heaped up debts
The Electricity of Vietnam (EVN) has complained many times that it has been incurring heavy losses, because it has to sell electricity at the prices much lower than the production costs.
When reviewing the business performance in 2000, the group announced the loss of 8 trillion dong. The information has caught the special attention from the public, because people cannot understand why such a big group, which enjoys the monopoly in providing electricity, still makes loss.
However, EVN not only has been incurring losses, but also facing big debts. In early April 2011, PetroVietnam said that EVN owes 5 trillion dong to PetroVietnam. Most recently, the Vietnam Coal and Mineral Industries Group (Vinacomin), said EVN has not made the payment of 1600 billion dong for the coal it purchased from Vinacomin.
Experts have attributed the big losses and debts to the bad business management and erroneous business strategy. EVN has been injecting money in many other investment fields. Especially, its decision to pour money into the telecom sector by setting up EVN Telecom, has been described as a hazardous move. Because, there are many giants in the market already, namely VinaPhone, MobiFone and Viettel.
In fact, EVN has been trying to withdraw capital from EVN Telecom to focus on its main business field. However, it is not easy to find the partners who accept to buy stakes of EVN Telecom. FPT, which intended to buy EVN Telecom’s stake, and has finally canceled the deal.
Petrolimex loses 7 trillion dong a day
In mid February 2011, in the meeting between the government and state owned economic groups and general corporations, Bui Ngoc Bao, General Director of Petrolimex, which is holding 60 percent of the petroleum distribution market share in Vietnam, said that with the petrol price at that time, the corporation was incurring the loss of 7 trillion dong a day.
Most recently, when reviewing the business result in the first quarter of the year, Petrolimex said by March 31, the corporation had incurred the loss of 2650 billion dong from selling petroleum products.
However, according to Dat Viet, doubts have been raised that if the sale of petroleum products at the prices lower than the cost prices is the only reason behind the big loss.
What’s behind the big losses?
In July and August 2010, local press published a series of articles about the Vietnam Shipbuilding Industry Group (Vinashin), whose losses and debts had climbed to 80 trillion dong.
Many reasons have been cited explaining the big losses, including the bad management and unreasonable business strategy. However, experts have pointed out that the losses not only show the incapability of managers, but also the lack of transparency in using the state’s money.
vietnamnet, Dat Viet
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