SOEs’ violations put big dent in the state budget

According to a State Audit of Vietnam (SAV) report on state budget usage in 2010, nearly all of 27 audited state-run corporations and groups (CGs) failed to sufficiently contribute to the state coffers in 2010. They were asked by SAV to pay back about $390.57 million to the state budget.

The report, which was released last week, said the two CGs Electricity of Vietnam and Vietnam Waterway Construction Corporation suffered from big losses of about $403.84 million and $3.53 million, respectively.

Deputy State Auditor General Le Minh Khai pointed out CGs’ lax financial management  with a debt to equity ratio of 50.88 per cent for Truong Son Construction Corporation, 37.58 per cent for Vietnam Waterway Construction Corporation, 31.13 per cent for Agriculture and Irrigation Mechanisation and Electrification Corporation and 24.37 per cent for Transport Engineering Design Incorporated.

“These companies have big overdue debts and their inventories have been calculated inaccurately,” Khai said.

Most audited CGs were found to have inefficient non-core investment activities. For instance, Vinalines’ non-core investment amounted to $32.3 million, equivalent to 10.37 per cent of its charter capital, Vinacomin $88 million - 12.09 per cent, EVN $218.7 million - 4.13 per cent and VICEM $30.5 million - 5.27 per cent.

The non-core investment, especially in finance, banking, securities, insurance and property, has induced big losses. For instance, EVN made a loss of around $48 million due to its inefficient  telecommunications investment. In another case, securities investments left Saigon Beer, Alcohol and Beverage Corporation (Sabeco) out of pocket by $17.2 million.

The report said operations of 11 out of 21 CGs mainly relied on borrowing. For instance, the debt to equity ratio for Truong Son Construction Corporation was 9.19 times, Infrastructure Development and Construction Corporation (4.79), Agriculture and Irrigation Mechanisation and Electrification Corporation (4.39), EVN (3.83) and Vinalines (3.12).

Meanwhile, under Decree 09 dated February 5, 2009,  specifying the financial management of state-owned enterprises (SOEs), the acceptable debt to equity ratio of an SOE is three. “These figures show that many CGs are playing ducks and drakes with the state’s money. Meanwhile, the government’s financial management over them remains too lax,” said Nguyen Dinh Cung, vice head of the Central Institute for Economic Management (CIEM).

“While using the state budget inefficiently, SOEs are largely responsible for the 72 per cent increase in the consumer price index during 2008-2011, seriously affecting the livelihoods of many people,” said Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Programme in Ho Chi Minh City.