Most capital of enterprises come from bank loans. Through a programme on reorganisation of enterprises, banks settled VND 1,500 billion of receivable debts and VND 1,300 billion payable debts. However, there are still shortcomings in State-owned enterprises’ debts, causing disadvantages to banks’ operation.
Banks as main capital channel of enterprises
Vietnam now has 4,200 State-owned enterprises to be reorganised and equitised. However, under the enterprise reorganisation and equitisation roadmap, there are only four years to complete the process. Apart from measures to promote enterprise reorganisation, the Government has created most favourable conditions for banks to apply credit mechanisms, equal for all economic sectors.
State-owned enterprises have a huge demand for bank loans but many commercial banks cannot meet it. Some major projects developed by the Electricity Corporation of Vietnam, the Oil Vietnam and Gas Corporation and Vietnam Post and Telecommunication Corporation want to get loans from banks to invest in fixed and liquid assets. Banks said that they lack information about enterprises, especially corporations 90 and 91. Most banks access enterprises via their finance departments. However, information about enterprises’ financial status and credit of commercial banks and the Credit Information Centre often does not match each other. The information is not updated regularly, so it is difficult for banks to evaluate their loans and control the quality of their credit. At present, State-owned enterprises use assets formed with loans, such as workshops, construction works and land use right, as their mortgage for bank loans. Even many enterprises use old and outdated machines and equipment as mortgage. This caused enterprises difficulties in settling bad debts, resulting high credit risks.
In fact, State-owned enterprises have credit relations with commercial banks but banks are not allowed to contribute their inputs and comments on the reorganisation and rearrangement of State-owned enterprises. Banks lack information and are in a very passive position to evaluate their loans and collect their debts. Many enterprises even do not approve programmes on their reorganisation to avoid their debt payment responsibility or they propose their management agencies to settle banks loans, not following the regulations of the law.
Disadvantages for commercial banks
Under the existing regulations, commercial banks are not allowed to partake in the conversion of State-owned enterprises, which, in turn, puts commercial banks in a disadvantageous position. The steering board on State-owned enterprise renewal often settle issues, preferring enterprises’ interest protection to banks’ one. This, accidentally, has transferred financial difficulties from enterprises to banks. The Decree N0 187/2004/ND-CP on converting State-owned enterprises into joint stock boasts many disadvantages for commercial banks. At the same time, under the Decree N0 69/2002/ND-CP by the Government on settling bad debts stipulates that non-receivable debts when being cleared should be accounted into banks’ costs. Under the circulation providing guidelines on the implementation of the Decree 187 by the Ministry of Finance stipulates that in case of losses and enterprises’ inability to pay their bad debts, enterprises should complete procedures to propose debt rescheduling and clearance under the existing law. Those debts, which cannot be paid to commercial banks, will be considered for clearance but not exceeding the remaining losses. Within 20 working days since receiving procedures of enterprises, banks should contribute their inputs and comments in writing on debt settlement. Until the moment in which enterprises’ value is announced, if inputs and comments on debt settlement are not sent to enterprises, debts and interests will be temporarily removed from enterprises’ value for enterprises to be equitised. These regulations have created favourable conditions for unprofitable enterprises to rely on their losses to avoid debt payment and enjoy bank loans’ interest exemption or reduction.
The reorganisation and equitisation of State-owned enterprises are necessary. However, without appropriate measures to settle enterprises’ bad debts, commercial banks will certainly suffer with increased non-performing loans, thus hampering the reorganisation of local commercial banks for international integration.
Lan Anh
Vietnamese
