Giant debts of Vietnam's SOEs require government bailout: report

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State-owned enterprises (SOEs) in Vietnam are piling up debts the government is being forced to repay, a new report from the Ministry of Finance says.

The government has been repaying debts for four enterprises, including the Vietnam Paper Corporation and the Vietnam Cement Industry Corporation, Finance Minister Vuong Dinh Hue said in the report, which was sent to legislators this week.

These companies had taken out loans with government guarantees and had difficulties repaying the debts, worth a total of US$109.7 million, Hue said.

He said the enterprises are "being restructured" and will pay back the government within five years.

State enterprises rely heavily on loans, but their repayment capacities are weak, he added.

According to the report, debts at all state companies in Vietnam totaled VND1,292 trillion ($62.1 billion) at the end of 2011, up 18.9 percent from 2010. Up to 30 of them had a debt-to-equity ratio higher than three.

State utility Electricity of Vietnam, for instance, racked up VND99.26 trillion ($4.7 billion) in foreign debts, used to fund the construction of new power plants. The SOE's overdue payments have reached VND10.15 trillion ($488 million), the report said.

State enterprises have been given more autonomy in using state funds and assets than they deserve, Bui Duc Thu, a member of the National Assembly's Finance and Budget Committee, commented on the report.

"In business, any company will have debts and that is normal. But we need to consider its assets, performance and capital management in order to keep the debts at a reasonable and safe level," he said. "We can't just let a company borrow a huge amount of money, only to see it inflict serious harm on the society when it goes bankrupt."

Thu said the government also needs to disclose all the information concerning bad debts accrued by state enterprises and how to deal with them.

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