State-run enterprises currently hold up to 80 percent of credit capital from domestic banks and 70 percent of foreign borrowing capital but their earnings account for merely 40 percent of GDP but they have failed to establish popular trademarks in the international market.

The figures were released at a working session between the Prime Minister and representatives from various domestic economic groups.

Mr An said, ”I have no comment on the figures, which might be inaccurate. I don’t believe that State-run enterprises hold up to 80 percent of State credit capital. Vinatex’s possession of VND2,800 billion State capital is not a large amount as the group has an annual turnover of approximately VND2,500 billion and US$1.5 billion from exports alone. In 2007, its earnings reached VND570 billion.”

At present, the group’s investment capital provided by commercial banks is based on the domestic markets interest rates. No preferential credit loans from the State are given to the garment and textile sector, said Mr An.

Other business activities
Reporter: In recent times, economic groups have been criticised for participating in high-risk business areas such as real estate, securities and the monetary market. What is your opinion about that?

Mr An: I have no idea about other domestic groups’ operations. Vinatex’s main lines of business are to produce and export garment and textile products. The turnover from such activities makes up around 90 percent of the group’s revenue and its investment capital for this area accounts for between 85-87 percent of its total.

Apart from its main business activities, Vinatex runs three subordinate operations in infrastructure, retail and finance with a view to serving its main business activities.

In terms of infrastructure, the group has poured its business capital into five industrial parks and is currently building another five industrial parks in order to support garment and textile projects and treat garment and textile waste.

In addition, Vinatex has also built a number of trading centres to develop garment and textile wholesale and retail systems.

Aside from this, the group has opened a supermarket network in which 60 percent of its products for sale are garments and textiles and 40 percent are other products in a bid to attract more customers.

In terms of financial business, Vinatex has established a finance company with a total investment capital of VND184 billion to help its businesses with capital mobilisation. For the time being, the company faces little or no risk as its overdue debt remains at the permissible rate of 3 percent regulated by the State Bank of Vietnam (SBV).

If such a company had not been set up, many projects and subsidiary companies might have gone bankrupt. In 2007, the group joined a securities company, which serves as a consultant and advocate for its equitisation activities. The group’s financial business aim to support its other main business activities.

Reporter: Do you think that the current level of business capital invested by Vinatex in other areas is too high?

Mr An: The Government has issued a decision saying that state-owned companies and corporations can invest a maximum 30 percent of their total capital in other fields. Corporations must focus on their core activities, however, they will suffer if they do not run other lines of business to support their main activity. Therefore, it is essential for corporations to investing in other areas.

VINATEX’s investment in building commercial centers, industrial zones, financial and retail activities accounts for 13 percent of its total capital.

Proper view on “inside investment” and “outside investment”

Reporter: At a recent meeting on renovating State-owned enterprises (SOEs) in Hanoi, Deputy Prime Minister Nguyen Sinh Hung said that the scattered investment of SOEs makes us have second thoughts on their financial management. Do you think so?

Mr An: I agree that we have to criticize SOEs, which focus more on diversifying their operations than running their core business. However, VINATEX’s investment of 13 percent in other operations is not much. Pham Viet Muon, deputy head of the National Steering Committee for Enterprise Reform and Development (NSCERD) said that SOEs’ investment in other areas is around 9 percent. Private enterprises find it easy to diversify their operations as they are responsible for their own business profits. However, for SOEs, they do not enjoy the profits they make but they suffer from the losses they caused. Therefore, “no one wants to pursue bold and enterprising activities, or take a risk”.

Reporter: However, groups want to get involved in high-risk areas such as securities. Is this at odds with others which refuse to put their businesses at risk?

Mr An: Investing in securities is normal as we just contribute capital to a securities company. Capital for securities investment only makes up a small part of the total capital.

VINATEX has 80 companies and groups, which are being equitised and the securities market is a channel to mobilize capital for investment. In the past, investment capital was mainly mobilized through banks. Now we can mobilize capital from the securities market, instead of taking out loans from the banks. Those people who buy VINATEX shares are investors and the Group, with many investment projects in operation, is not completely dependent on the banks. In general, all big groups in the world establish public companies to mobilise capital.

Reporter: When investing in finance, real estate and industrial zones, companies may face high risks. Is there any contradiction between the general investment target and the growth target of the group?

Mr An: Until now I have found no contradiction because investing in industrial zones in recent years has brought in high profits. Thanks to industrial zones, we have found many partners to cooperate with. Without industrial zones, VINATEX could not be so successful.

Reporter: Thank you very much.