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SOEs doing well despite losses   2011-02-17 - Viet Nam Net

Though all state owned economic groups complain that selling at the prices below the production costs has made them incur heavy losses, it turns out they are in fact profitable.




All state owned economic groups are debtors




The working session between the Government’s standing committee, state owned economic groups and general corporations on February 15 took place in a very special context, when the State Bank of Vietnam had just announced the exchange rate adjustment. At the meeting, the economic groups who produce the input materials for many other industries insisted on raising their sale prices.




In fact, the economic groups, including electricity and coal companies, have been calling on raising the sale prices for a long time. They said that they have been incurring heavy losses from selling at the prices below the production costs, and that if this continues, they will not have money for re-investment. This would in turn mean shortage of energy and fuel for the entire national economy.




The biggest state owned economic groups complained to the Prime Minister not only about their losses, but also said they were the big debtors of each others.




General Director of the Vietnam Coal and Mineral Industries Group (Vinacomin) Tran Xuan Hoa said that the Electricity of Vietnam (EVN) was the biggest debtor among coal and oil and gas groups, and that the more coal Vinacomin sells to EVN, the bigger loss Vinacomin incurs.




“All of us are the debtors of each other,” Bui Ngoc Bao, General Director of Petrolimex, the corporation which holds 60 percent of the petroleum product distribution market, replied. “Hoa said that EVN is a big debtor. Then Vinacomin is also a big debtor of petroleum distributors, because we also have to sell diesel to the coal producer at low prices”.




Prejudiced against state owned enterprises?




Tran Xuan Hoa, Vinacomin’s General Director has been complaining about the group’s failure to issue $500 million worth of bonds. Hoa complained that in the eyes of investors, state owned enterprises are inefficient and always take losses, and have turned their back at Vinacomin’s bonds.




Hoa related that in November 2010, a group of Vinacomin’s key leaders went abroad to issue bonds. They went to nine countries, where they presented the plan, talked about the capability of Vinacomin, and managed to convince investors.




However, everything changed overnight, as a series of articles about the numerous unsettled problems, of state owned enterprises, made the investors change their minds and refused to purchase Vinacomin’s bonds.




Believing that the image state owned enterprises has been sullied, Hoa asked the Government to help improve it




State owned economic groups are doing well, why?




While state owned economic groups all complain about loss, the latest report released by the Steering Committee on State owned Enterprise Renovation on February 15 showed they were in fact profitable.




Twenty out of 21 economic groups and general corporations have been doing well. The total pretax profit of the enterprises reached 70,778 billion dong, while they paid 173,549 billion dong to the state budget. The list of the enterprises which have sharpest paid-tax increases includes Vinacomin. In general, other financial indicators of the state owned enterprises are positive




Prime Minister Nguyen Tan Dung highly appreciates the role of the state owned enterprises in the national economy, saying that it would have been very difficult for the Government to drive the national economy without them.




The question is why state owned enterprises are still doing well, despite their difficulties and problems?




An advisor to VietNamNet’s Vietnam Economic Forum says that there are four things that need to be done. First, it is necessary to audit economic groups to find out what brings them profit and what brings them losses. Second, it is necessary to split the business activities from public  projects. Third, it is necessary to clarify the social responsibility of state owned enterprises and fourth, reconsider the mechanism on leadership appointment.

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