Vinashin scandal causes waves

The Central Committee of the Vietnam Fatherland’s chairman Huynh Dam told last week’s opening of the eighth session of the 12th National Assembly (NA) that the public were irritated by the Vinashin financial scandal.

Vinashin took out new loans to pay old debts and borrowed short-term to pay long-term debts. It even used working capital as investment capital and suffered heavy losses in 2009. By June 2010, though its total assets were estimated at VND104 trillion (about $5.4 billion), its liabilities had risen to VND86 trillion (about $4.5 billion). 

“Constituents and the public asked the government to clarify violations of Vinashin’s leadership and the responsibility for state management of the government and relevant ministries and agencies. Strict punishments need to be imposed on violators,” Dam said.

He said constituents and the public also asked the government to launch more stringent inspections of state-run groups and corporations’ financial status and operational effectiveness.

In the government’s report on Vietnam’s socio-economic development in 2010 and 2011, which was delivered to the NA last week, Prime Minister Nguyen Tan Dung affirmed that Vinashin’s violations were attributed to its leadership’s weaknesses and shortcomings in state management.

“The government has seriously reviewed Vinashin’s operations and delved out the group’s scandal, as well as devise specific plans to correct Vinashin’s failure,” Dung said.

He also said the government had asked relevant ministries and agencies to perfect regulations to ameliorate state-run groups’ and corporations’ operational and management effectiveness.

So far, the government has established 11 state-owned economic groups on  a trial basis like Electricity of Vietnam (EVN), Vietnam National Oil and Gas Group, Vietnam Textile and Garment Group and Vietnam Rubber Group.

The government expects these groups to be key economic players which help stabilise the macro-economy. However, most of those groups, like Vinashin, had expanded business operations outside their core businesses and into finance, banking, securities, insurance and property.

The NA Standing Committee reported that in 2008, 47 groups and corporations invested in such non-core business sectors, of which 34 invested VND2.039 trillion ($113.2 million) and VND14.26 trillion ($792.3 million), respectively, into the stock market and banking and 18 invested VND3.098 trillion ($172.1 million) into the insurance sector.

For example, in the finance sector PetroVietnam invested VND5.494 trillion ($305.2 million), occupying 26 per cent of total money invested in this sector by 90 groups and corporations in 2008. In another case, EVN invested VND2.146 trillion ($119.2 million) in this sector.

The committee also said that the debts at state-owned groups and corporations were at an alarming level, warning that the government should have specific actions. For example, up to December 31, 2008, many  groups and corporations had the total debt-to-equity rate of over 10 times.