Debts in Vietnam's state-owned sector hit nearly VND1,350 trillion (US$64.1 billion) in 2012, up 6 percent from the previous year and amounting to nearly half the country's GDP, according to a government report .
Among 127 corporate groups and corporations, the oil and gas group PetroVietnam ran up the largest debt of VND124 trillion, according to the report, which was sent to the National Assembly.
Many analysts were concerned about such large debts given last year's gross domestic product of $136 billion, but Vu Viet Ngoan, chairman of the National Financial Supervisory, said the figure was "meaningless."
He told news website Saigon Tiep Thi that the debt size was not as important as a firm's financial leverage and how effectively the funds are used.
Ngoan said the average debt-to-equity ratio -- which was 1.46 on average, according to the report -- was lower than it was five or six years ago, which was an improvement.
He said only levels above 3 were worth concern.
According to the report, less than 40 percent of groups and corporations reported ratios above 3.
But the ratios were noticeably high at some firms like machine manufacturer Lilama, with a ratio of 53, construction firm Bach Dang with 21, and Civil construction firm Cienco 1, with 18.
Le Dang Doanh, former chief of the Central Institute for Economic Management, fears the debts will act as a barrier to the country's attempts to reform the sector.
The government should let indebted firms who make repeated losses go bankrupt, he said.
He doubted the government's practice of letting firms develop restructuring plans would be effective, saying it was like expecting someone with a disabled leg to stand up on his own.
Doanh and economist Nguyen Minh Phong agreed that that the sector needs transparent debt plans.
Economist Bui Kien Thanh said the massive debts were "unsurprising" due to firms' ineffective operations.
The government's repeated help to firms by negotiating debt freezes with banks and injecting more investment capital every time they report losses only lets them incur even bigger debts the next time, he said.
According to the report, state firms have continued over-diversifying, which analysts say is one of the biggest causes of their insolvency.
Non-core investments in banking and housing rose by 3 percent and 20 percent from 2011, respectively, while those in stocks, private funds, and insurance declined.
The country's 127 corporate groups and corporations made up a fifth of the total debts in the sector, bad debts of which were estimated at VND13.5 trillion, up 24.5 percent from 2011.
Of this, 25 firms posted accumulated losses of VND17.03 trillion in total.
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