State-owned corporations and groups race against each other to invest in the fields that are not their function and incur losses, according to the NA Standing Committee’s supervisory report.

According to the report, 47 State-owned corporations and groups are investing in banking, securities, insurance and contribute capital to investment funds. The total capital they invested in the finance sector by the end of 2008 was over 21.1 trillion billion ($1.18 billion). However, the Incremental Capital-Output Rate or ICOR of almost groups and corporations in this field is lower than their investment in their major business.

In 2008, when the stock market felt down, most of them incurred losses or gained no profit. By the end of December 2008, the Electricity of Vietnam group (EVN) invested 214 billion ($12.6 million) in the stock market. Other groups contributed to investment funds, for example Vietnam Oil and Gas Group (368.9 billion dong), the Vietnam Rubber Group (281 billion dong), the Vietnam Shipbuilding Industry Group (Vinashin) (144 billion dong), and gain no profit.

The report said that while state-owned groups invested huge money in security and finance, they complained to lack capital for the state’s key projects. For example, the EVN group invested around 2.1 trillion dong in the financial sector while it said to lack 382.9 trillion dong for developing power sources from now to 2015. This year, this group returned 13 power projects to the government, saying that it didn’t have enough capital.

The report also pointed out that nearly half of state-owned groups operated ineffectively, with the ICOR of less than 10 percent.

Many state-owned corporations, especially in the construction sector, do business thanks to banking loans. Their debts are many times higher than their stock holder equity.

There were 31 corporations and groups in this situation in 2007 and 2008, accounting for 32 percent of State-owned groups.

By the end of 2008, there were seven groups having high overdue debts totaling nearly 4.2 trillion dong ($247 million). Vinashin has overdue debt worth 3.81 trillion, accounting for 91.4 percent of the total overdue debt of the seven groups. The total debt of these seven groups was up to 128.78 trillion dong (over $7 billion).

(ICOR: the ratio of investment to growth, equal to one divided by the marginal product of capital. The higher the ICOR, the lower the productivity of capital. The ICOR can be thought of as a measure of the inefficiency with which capital is used. In most countries the ICOR is in the neighborhood of 3)

Le Nhung