Authorities are warning state-owned Vietnamese groups and companies, which use up to 60 percent of bank loans and 70 percent from foreign credits, that they are derailing their core business and exposing potential risks to the entire economy, the Doanh Nhan Sai Gon newspaper said.
Groups and corporations all want to set up banks and securities firms in the context of loopholes of the legal framework and limited supervisory capacity, which may bring unprecedented risks, government economists said.
Le Dang Doanh, a leading economist, called the establishment of recent banks “systematic faults”. Recent measures by the government to stabilize the macroeconomy are comprehensive and given top priority to socioeconomic targets, however, the supervisory capacity and endorsement is too weak, Doanh said, pointing out that we are awaiting specific steps for cutting public investments.
Banks are asked to perform an independent supervisory role of projects before providing loans, but now they are under groups, therefore transparency is not ensured. In fact, large flows of cash have been invested in property projects from banks, which result in huge squandering, Doanh added.
Ho Huu Hanh, director of the Ho Chi Minh City-based arm of the State Bank of Vietnam said that the groups are approved to form their banks with limited supervisory capacity, which is harmful for the country’s economy. These groups borrowed much from banks’ loans. Besides, they [groups and corporations] allocated 37 percent of their capital for financial investments.
“Groups and corporations are not on track of their core business and improvement of competitive edges, and they all are seeking short-term profits, which will expose risks,” Minister of Planning and Investment Vo Hong Phuc was quoted as emphasizing.
“This will lead to cross legged investment, particularly in the banking sector and neglecting tasks assigned by the government,” Phuc added.
According to UNDP’s report, between 1999 and 2006, investments into state-owned sector, including groups and corporations made up for more than 50 percent of the country’s investment with return on equity of only 3 percent. In the meantime, FDI and private sectors posted 164 percent and 56 percent, respectively.
Last year, total investments by 53 groups and corporations reached VND111 trillion (US$6.9375 billion). (Saigon BusinessPeople)
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