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Concern at corporation spending
State-owned corporations’ capital usage efficiency has sparked National Assembly Standing Committee concerns despite their reported profitability.
According to the Standing Committee’s monitoring report released last week, state-owned corporations and business groups are increasingly displaying business efficiency.
The number of corporations and groups with return on equity (ROE) ratios of over 15 increased from 23 in 2006 to 35 in 2008. The number suffering losses decreased from six to three during the period.
Ha Van Hien, chairman of the National Assembly’s Economic Committee, said almost all state-owned corporations and groups were making a profit. However, he said these enterprises had been using their capital and assets less effectively than private and foreign-invested businesses.
“State-owned enterprises [SOEs] make up the largest proportion of the economy’s capital. However, this sector’s contribution to the country’s total revenue is always lower than that of the private sector,” said Hien.
He said SOEs possessed 52 per cent of the economy’s total capital and contributed 35.8 per cent to the economy’s total revenue in 2006, while the private sector’s capital and revenue contribution figures were 28 and 42 per cent, respectively. Similarly, in 2007, SOEs and private enterprises accounted for 47 and 34.6 per cent of the economy’s capital and made up 31.5 and 47.2 per cent of the economy’s revenue, respectively.
“The performance of SOEs in general and state-owned corporations and groups in particular was lower than their potential in terms of capital and assets,” said Hien. The monitoring report also pointed out that several corporations had been struggling to deal with their overdue debts and bad debts. According to a State Bank report on nine corporations in the construction sector, overdue debts stood at VND1.21 trillion ($68 million) by December 31, 2008, making up 10.5 per cent of their total outstanding debts at credit organisations. Some corporations’ overdue debt rates reached over 50 per cent.
Another State Bank report on seven state-owned groups said that total overdue debts of these groups stood at VND4.17 trillion ($234 million) by December 31, 2008, accounting for 3.24 per cent of their total outstanding debts, of which 15 per cent were bad debts.
Several corporations have issued corporate bonds just to restructure their debts, said the monitoring report. The report also said due to the current global economic crisis, credit organisations had rescheduled loan terms. Therefore, the rates of overdue and bad debts did not reflect the reality.
Some Standing Committee members said it was time to thoroughly study SOEs’ operating effectiveness. “It’s necessary to find out the real growth of [state-owned] corporations and groups. Has their growth come from production and business or from selling of state assets?” said Phung Quoc Hien, chairman of the National Assembly’s Committee for Finance and Budget.
VietNamNetm, VIR
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