Many state-owned firms under ‘special financial supervision’

In a report submitted to the National Assembly Saturday, the agency said it found many inadequacies in the management and use of state capital in 235 subsidiaries operating under 36 corporations or groups in 2019.

It said that many of these subsidiaries have shown signs of lacking financial security. At the top of this list is the Vietnam Coal & Mineral Group (TKV), with 24 subsidiaries cautioned about their financial safety.

Those with higher financial risk have been put on a special financial supervision watchlist. These include major names like budget carrier Jetstar Pacific Airlines, a subsidiary of national carrier Vietnam Airlines; Ninh Binh Fertilizer, Ha Bac Nitrogenous Fertilizer and DAP-Vinachem Fertilizer plants in northern Vietnam which are subsidiaries of chemical giant Vinachem; and Petrolimex Laos, a subsidiary of national petroleum distributor Petrolimex.

Many companies were found without any capital management rules, engaging in ineffective cash flow practices. 

The problem of cross-ownership of subsidiaries within a corporate group has also not been overcome, the auditing agency said. For instance, six subsidiaries of TKV were found to have contributed capital to the Cam Pha Thermal Power Plant, while two state-owned parent corporations contributed capital to the Nong Son Coal Plant.

Many companies and corporations have also been slow to divest from non-core businesses. Parent corporation Vinatana, a manufacturer of industrial packaging, has not yet divested from its real estate business; and Petrolimex has not divested its stake in PGBank.

The agency found many violations in the use and management of capital in many projects, causing costs to balloon or construction be delayed, with some projects even unable to operate.

For instance, the Binh Phuoc Ethanol Plant in Binh Phuoc Province was constructed when there were no clear regulations on bio-ethanol production, and without a plan on the consumption of the produced bio-fuels. The investor for this project, Petrovietnam, had submitted plans for approval without having had it reviewed and appraised, and lacked many necessary paperwork when giving out work to contractors.

Because many of these projects were approved without the adequate bases for approval, they suffered major losses or became inoperable, leading to loss of owners’ equity. For instance, the Binh Phuoc Ethanol project was closed for seven years because there was no demand for its bio-ethanol, but it still racked up VND1.62 trillion ($69.65 million) in debt by the end of 2018.

And some projects’ costs have ballooned as a result of not having conducted environmental impact assessment reports at the time of approval, the agency said.

For instance, the Song Bung 2 Hydropower project saw costs rise by VND2.87 trillion ($123.39 million), the Ban Chat Hydroelectric plant by VND7.33 trillion ($315.14 million), and the Trung Son Hydropower plant by VND1.32 trillion ($56.75 million).