Restructuring & Saving

On February 21, Vietnam Housing and Urban Development Group (HUD) signed a commitment to reduce management expense and make public its restructuring plan. This is the fifth group to announce their plans in accordance with the guidance of the Government.

 

In the difficult property market conditions, HUD continued its growth rate of 10 percent in 2011. Mr. Nguyen Dang Nam, Chairman of HUD Management Board, said that difficulties will continue in 2012 for businesses, especially housing and urban development companies and real estate investors. Nevertheless, HUD maintains its growth rate at 10-17 percent, higher than 2011.

 

One of the measures HUD uses presently is cutting business spending, management expense and production costs. For HUD, saving is essential to redefine investments inprojects suitable for mobilized resources, while cancelling or postponing less pressing projects that have the least affect on business efficiency. Only new projects of high efficiency and acquired capital can be implemented. HUD will also apply strict regulations on saving, against waste and maximum cuts in management expense.

 

Specific plans have been sent to member companies. In 2012, saving is estimated at VND125 billion and profit will increase from VND1,980 billion to VND2,105 billion.

 

Concerning the reduction of spending and increasing business efficiency of State-owned groups and corporations, Finance Minister Vuong Dinh Hue said that their main task is to cut spending, reducing expenses by 5-10 percent, and improving business management. HUD is the fifth major group to announcing restructuring plans in accordance with the Government’s decision, after the Garment, Energy, Insurance and Shipping groups.

 

On February 20, energy group EVN announced an impressive plan: It will cut expenses by VND1,800 billion, including VND500 billion of direct spending and VND1,300 billion from oil generator stations.

 

 According to Minister Vuong Dinh Hue, the five groups have registered reduction of over VND3,000 billion in spending. The garment group, by its own strength competing successfully at home and abroad for many years, saved VND745 billion last year and this year estimated savings at VND1,150 billion. EVN plans to cut VND125 billion this year with 14.5 percent in management expense by the parent company and the remaining by member companies. Mr.Vuong Dinh Hue said that those figures are impressive and will spread across the business community, increasing the sense of responsibility among workers and staff of State-owned groups and enterprises.

 

He also disclosed that the plan for restructuring State-owned groups and corporations has been completed with the cooperation of related ministries and agencies. It will be submitted to the Politburo for consideration and the Government will implement it. There are two main objectives: One, placing State-owned enterprises (SOEs) on equal footing with other economic sectors, increasing their efficiency and growth comparable with resources under their control. Two, SOEs must be the driving force of the economy, with a dominating role to regulate the economy. Each and every economic group and corporation will be restructured.

 

The Minister stressed that among HUD solutions for restructuring, the most important is to increase business management capacity. In the conditions of high inflation, business management plays the vital role. The Government has instructed businesses to re-organize and increase efficiency. The first and foremost task is to improve management, and reduce expenses.

 

This can be the first sign of a revolution in the management of SOEs. Mr Vuong Dinh Hue raised the question: Why can’t SOEs compete on a level playing field with other economic sectors? SOEs must prove their strength and competitiveness to a level comparable with the national resources under their control.

 

The Finance Minister also announced that, in addition to the 3-month delay in taxes for small and medium-sized enterprises (SMEs) and labour-intensive companies, the Minister has submitted to the Government measures to support businesses, most notably the development of business securities market. Regulations on corporate credibility indexes will be established to develop securities market at home and businesses can issue securities abroad. The securities market will be restored and developed. In Quarter I, regulations will be in force to ensure the market is a real channel to induce capital to the economy.

 

Besides, the Government also calls on financial support and assistance from all economic partners. For instance, Song Da Corporation has recently received US$1130 million with low interest rate to restructure debts. Currently, the Finance Ministry is selecting businesses for Phases 2 and 3 of debt restructuring. They will have access to credit at low interest rates.