Vietnam improving oversight at state firms: Minister

Vietnam is tightening oversight of state-owned corporations, a minister told a World Bank-led meeting Wednesday in response to donor concerns after the near-bankruptcy of shipping giant Vinashin.

“I acknowledge that Vinashin is our lesson,” Minister of Planning and Investment Vo Hong Phuc said.

“We are now improving the institutions to enhance corporate governance” for state-owned firms, he said in closing remarks to the annual Consultative Group meeting between the government and its international donors.

Investors and analysts fear the scandal at Vinashin, the Vietnam Shipbuilding Industry Group, is symptomatic of a wider problem and could cause broader economic damage.

Vinashin has reportedly asked for deferral of a 60-million-dollar repayment due December 20, the first instalment on a 600-million-dollar loan arranged by Credit Suisse in 2007.

Economists say a default could raise the cost at which Vietnam can borrow on international capital markets and lead to downgrades in the creditworthiness of other state-owned firms.

Already, the ratings agency Standard & Poor’s on Monday lowered its long-term corporate rating on Vietnam National Coal, Minerals Industry Group (Vinacomin) to BB- from BB.

Citing the Vinashin case, the agency said there was a low likelihood of extraordinary government support to Vinacomin if it became financially distressed.

Vietnam’s transport minister has said Vinashin must settle its own debts — which total at least 86 trillion dong (4.4 billion dollars) — and will not be bailed out by the state.

“We believe there is a high level of uncertainty regarding Vinashin’s ability to meet the principal payment on its foreign currency bank loan when due in the next two weeks,” Standard & Poor’s said on Wednesday.

A World Bank report presented to the Consultative Group meeting said non-performing loan ratios are expected to increase for banks with significant exposure to Vinashin.

Almost half of Vietnam’s formal economy consists of state-owned enterprises, many of which “are inefficient to the point of being economic handicaps for the country and its banking sector,” European Union ambassador Sean Doyle told the meeting.- AFP

Tags: Vietnam companies, Vietnam enterprises, Vietnam SOEs