How serious are State-owned enterprises’ debts?
While economist warn that state-owned enterprises’ debts will pose a threat to national financial security, SOEs say that the big debts have been unavoidable.
A government report on SOE debts shows that total accounts payable of state-owned economic groups and general corporations had reached VND1,567 trillion by the end of 2014, an increase of 8% compared to 2013.
The foreign debts incurred by SOEs and guaranteed by the government had reached VND124.104 trillion, an increase of VND2 trillion over 2013.
SOEs not only sought capital from commercial bank loans, but they also issued corporate bonds to raise funds. Vinacomin, the coal miner, issued VND12.5 trillion worth of bonds, and Becamex Binh Duong VND7.2 trillion.
Many SOEs have ratios of accounts payable on stockholder equity higher than 3 – the safety line. These include Lilama, a machine installation corporation (11.67), Corporation No 36 (11.01) and Song Da Corporation (10.03).
While the reported debts raised worries about financial security and enterprises’ solvency, SOEs argue that borrowing money is needed and that the debts are ‘still within control’.
Le Van Tuan, general director of Lilama, said in Tuoi Tre newspaper that enterprises cannot exist without loans and that no one can operate with 100 percent of their own capital.
When asked about Lilama’s high ratio of accounts payable on stockholder equity, Tuan blamed the small capital Lilama has, just VND700 billion.
While Lilama only has modest capital, it always undertakes large contracts, some of which are worth US$1.4 billion.
“It is true that Lilama’s ratio of accounts payable on stockholder equity is high, but the Ministry of Finance’s inspectors affirmed that Lilama’s debts are still within control,” he said.
However, Ngo Minh Hai from CIEM still sees high risks in SOE debts.
He said that if SOEs still owe VND533 trillion to banks, they have used a large proportion of credit from certain institutions.
Meanwhile, of the total VND381 trillion worth of foreign debt, a large proportion, VND242 trillion, has been borrowed through the government and loans guaranteed by the government accounts. This means that if SOEs cannot pay debts, the government will have to come forward and pay the debts.
A report showed that in 2011-2014, the Ministry of Finance acted as the guarantee for the total loans worth US$12.35 billion.
Vu Dinh Anh, a renowned economist, also said on Dat Viet that he can see high risks as the amount of money SOEs have borrowed had been much higher than their stockholder equities.
The foreign debts incurred by SOEs and guaranteed by the government had reached VND124.104 trillion, an increase of VND2 trillion over 2013.
SOEs not only sought capital from commercial bank loans, but they also issued corporate bonds to raise funds. Vinacomin, the coal miner, issued VND12.5 trillion worth of bonds, and Becamex Binh Duong VND7.2 trillion.
Many SOEs have ratios of accounts payable on stockholder equity higher than 3 – the safety line. These include Lilama, a machine installation corporation (11.67), Corporation No 36 (11.01) and Song Da Corporation (10.03).
While the reported debts raised worries about financial security and enterprises’ solvency, SOEs argue that borrowing money is needed and that the debts are ‘still within control’.
Le Van Tuan, general director of Lilama, said in Tuoi Tre newspaper that enterprises cannot exist without loans and that no one can operate with 100 percent of their own capital.
When asked about Lilama’s high ratio of accounts payable on stockholder equity, Tuan blamed the small capital Lilama has, just VND700 billion.
While Lilama only has modest capital, it always undertakes large contracts, some of which are worth US$1.4 billion.
“It is true that Lilama’s ratio of accounts payable on stockholder equity is high, but the Ministry of Finance’s inspectors affirmed that Lilama’s debts are still within control,” he said.
However, Ngo Minh Hai from CIEM still sees high risks in SOE debts.
He said that if SOEs still owe VND533 trillion to banks, they have used a large proportion of credit from certain institutions.
Meanwhile, of the total VND381 trillion worth of foreign debt, a large proportion, VND242 trillion, has been borrowed through the government and loans guaranteed by the government accounts. This means that if SOEs cannot pay debts, the government will have to come forward and pay the debts.
A report showed that in 2011-2014, the Ministry of Finance acted as the guarantee for the total loans worth US$12.35 billion.
Vu Dinh Anh, a renowned economist, also said on Dat Viet that he can see high risks as the amount of money SOEs have borrowed had been much higher than their stockholder equities.
He warned that though the revenues of state-owned economic groups and general corporations are high, they will be danger if just one of their projects encounters problems.