State-owned firms beg for protection against poor business

Posted on 11 July 2016
 

Source: VietNamNet Bridge

State-owned firms are depending too much on government's subsidies and protection rather than improved competitiveness.

A prime example are Vinalines, a state-owned shipping firm that was once considered the market leader. However for over ten years, it has only achieved losses. The firm has racked-up so many losses that it has developed a reputation as a second-rated firm. Recently, amid difficulties and debts, Vinalines proposed to government to persuade coals firms to let them be their transporter.

Despite opposition and displeasure from other firms, the Ministry of Transport sent an official letter to the prime minister to create a chance for Vinalines to improve its foreign trade market share. The ministry also reminded that government once said they would prioritise Vinalines as transport provider for local firms but for various reasons, this hadn't been carried out.

On July 6, Thai Nguyen Iron and Steel Joint Stock Corporation (Tisco) sent out an urgent call for help. According to Tisco, the Environment Administration had issued guidance on how to import scrap even though the custom procedure for environmental safety certificate is still on-going to help firms. The company already have four thousand tonnes of scrap ready to be imported but the General Department of Vietnam Customs refused to let them import goods without the certification.

Previously, Tisco also asked for VND1trn (USD45m) to renovate and expand their factories while this VND8trn project is on the verge of bankruptcy and has little chance of surviving after nine years in operation.

A number of state-owned iron and steel companies are also asking for protection from imported products by increasing import duties. The Vietnam Sugar Association opposed the Hoang Anh Gia Lai Group's proposal to import 30,000 tonnes of sugar from the group's factory in Laos's Attapeu Province at a cheaper price.

It looks like they are asking for too much when these firms had already received a lot of preferential treatments, from being allocated huge plots of land to preferential taxes and bank loans. Now they even want the government to provide them with customers.

The government should stop listening to those pleas and let the firms compete fairly. With advantages given to them in early stages such as land and bank loans, they should be able to develop just as well as the Viettel Group or Vinamilk.

However, according to report from the Ministry of Finance, as of December 21, 2015, the total outstanding loans guaranteed by the government reached USD21bn, about 11.1% of GDP. Many of the firms benefited from the loans have recorded bad business results including Ha Long Cement JSC and Phuong Nam Pulp and Paper Company.

Despite government efforts in lowering taxes and rescheduling debts to help their operations, these state-owned firms continue to record bad results. It's time to let those firms go bankrupt and leave the playing field to more capable businesses. 



«  Back

Copyright © 2016 SEASI Site. All Rights Reserved.