Bad debts of foreign firms hit $80 mln

The bad debts caused by 22 foreign-invested projects owned by bankrupted foreign firm in Vietnam, mainly in two northern provinces of Hai Duong and Phu Tho, have amounted to nearly $80 million, Sai Gon Tiep Thi newspaper reported.

In addition, more than 230 projects from licensed Taiwanese and Korean investors have been dissolved and gone bankrupt so far, according to statistics from Vietnamese foreign investment authorities.

Some foreign investors used investment licenses to be able to borrow from banks, but then they came back home without repaying their loans to the banks.

In particular, the authorities of the northern Hai Duong Province in 2005 granted investment license for Taiwanese Kenmark to invest $500 million in a project in Viet Hoa Industrial Zone.

With the license, Kenmark was financed by Saigon Hanoi Bank (SHB)’s Quang Ninh branch, Bank for Investment and Development of Vietnam (BIDV)’s Thanh Do branch, and Hanoi Building Development Commercial Joint Stock Bank (Habubank)’s Bac Ninh branch with a total amount of $50 million.

But when the investor turned home due to disputes in the project in 2010, its borrowings turned into bad debts for those banks.

Some Korean companies have borrowed over $12 million, but when the project suffered losses, they returned their homeland without paying back any pennies, said Vu Van Minh, director of Vietnam Bank for Agriculture and Rural Development (Agribank)’s Phu Tho branch.

Agribank’s Phu Tho branch has sold entire land, factories and machineries of those companies only to retrieve some $60,000.

According to experts, since many banks often made appraisal of asset value only on the declaration document of the foreign firms for lending, they have been cheated by those foreign firms with untrue asset declarationw for more money.

Therefore, professional appraisal departments of the banks must bear certain responsibilities for those bad debts.

Facing the new situation, the prime minister has issued an Instruction No.1617 to leaders of ministries and provincial people’s committees required to review the grant of investment license for foreign-invested projects, including requirements on inspection, supervision for the obligation implementation of investors on the capital contribution schedule and capital mobilization.

The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment is also proposing to the government to re-apply the provisions of the equity at 30 percent for foreign investors when carrying out foreign-invested projects in Vietnam to tackle the situation.

The high bad debt level of FDI firms which has just been reported was due to the removal of Vietnam’s regulation on 30 percent equity of foreign firms into Vietnam since 2005, Thoi Bao Kinh Te Saigon newspaper quoted Do Nhat Hoang, director of FIA, as saying.

So, foreign investors have exploited it to get more loans from local banks when entering Vietnam, he added.

However, many banks were not careful in evaluating the loan applications, leading to lending with large amounts of capital into inefficient projects, Hoang said.

The State Bank of Vietnam (SBV) should take strict controls over the loans of foreign enterprises, Nguyen Dinh Cung, vice director of the Central Institute for Economic Management, told the newspaper.

If a project has been licensed, but exceeding 12 months, it has yet to be deployed or is deployed behind schedule without a legitimate reason, state authorities should revoke the investment license, he added.

Pledged foreign direct investment into Vietnam fell 28 percent year on year in the first 9 months of this year to $9.9 billion, while disbursed foreign direct investment rose 2 percent to $8.2 billion in the same period, said FIA.

Vietnam has struggled to contain Asia’s fastest inflation and stabilize the national currency while supporting economic expansion as the global recovery falters, according to Bloomberg.

Growth in the $104 billion economy slowed in the first three quarters of 2011, and the government said last month it will further restrain increases in lending to try to curb price gains.

Vietnam gave licenses to 675 new projects with a combined registered capital of $8.23 billion in January through September 20, while 178 existing projects boosted registered capital by $1.66 billion, according to FIA.

Source Tuoitrenews

Tags: Bad debts