Economic groups must not deviate from main business fields

16:57' 25/04/2008 (GMT+7)
VietNamNet Bridge – Replying to criticism from the public that economic groups and general corporations have been making heavy investments in non-forte business fields, the enterprises insist that they need to get short-term profit from the investments to serve long-term business.
Many thousands of billion dong at risk
Vinashin had 43 more subsidiaries in 2007
Pham Thanh Binh, Chairman of the Vietnam Shipbuilding Industry Group (Vinashin), said that Vinashin’s outward investments are ‘not worth mentioning’.
“Vinashin has never thought of making investments in real estate. We have only been building some welfare construction works, like turning guest houses into hotels,” Binh said.
Binh admitted that since 1997, Vinashin has added 43 subsidiaries and 11 associated and joint venture companies. However, he affirmed that Vinashin has not injected any VND in the companies, while it only made capital contributions with its brand name.
“95% of our strength, or VND47tril, has gone into our business field, shipbuilding,” Binh affirmed.
Explaining why Vinashin needs to make investments in non-shipbuilding fields, Binh said that shipbuilding requires long-term investment, which takes a long time to recover capital. Vinashin needs to earn profit from short-term investment deals to serve its long-term business strategy.
Answering VietNamNet’s question about the information that the government has asked the Ministry of Transport to examine the efficiency of $750mil worth of international bonds, Binh said that investment efficiency won’t be able to be measured for 10 more years.
Binh has warned that if the government stops allotting capital to economic groups, unimaginable consequences will follow.
“We have to borrow money from banks at high commercial interest rates. We have been seeking permission to issue bonds for the last six months, but the plan has not been approved,” Binh complained.
However, Deputy Prime Minister Nguyen Sinh Hung has denied the opinion that the government has stopped allocating capital to economic groups and general corporations. “The government won’t let economic groups’ and corporations’ operations stagnate due to lack of capital,” he stated.
Chairman of the Vietnam Textile and Garment Group (Vinatex) Le Van An also said that the group has been trying to find the most suitable investment portfolio. 85% of its strength has gone into its main business field, garments and textiles, while the other 15% has been reserved for the group’s financial company, for making capital contributions to banks, securities companies, and five industrial zones.
Meanwhile, General Director of the Electricity of Vietnam Dao Van Hung said that the government should allow economic groups and general corporations to make investments in other fields if the investments prove to be feasible in order to help them seek profit. Hung said that EVN operations serves public interest, and the group has been facing a lot of difficulties as it has been ordered to maintain the current electricity prices in order to help curb inflation.
Dinh La Thang, Chairman of PetroVietnam, talked to the press about the multi-field business of economic groups and corporations:
How many companies and how many non-oil and gas projects has PetroVietnam injected money in?
We now have over 10 subsidiaries, mostly corporations, including electricity-petroleum, tourism and finance companies.
We have also injected money in real estate and securities sectors, but we just hold low percentages of stakes: 11% in real estate and 30% in media. Investment in electricity should not be seen as outward investment because this is the gas-run power plant
We have been seeking permission to make capital contributions to the establishment of a bank, but we still cannot get the nod.
The investments in other business fields of PetroVietnam prove to be very low, at some 3% of total investments.
You may hear that a lot of enterprises now inject money in real estate and banking to seek fast profit. What would you say about this?
I absolutely agree that enterprises should not deviate from their main business fields.
Regarding the suitable proportions of their investments in other business fields, I think the proportions vary, depending on different groups. The most important thing is that the investments must bring profit. Malaysia’s Petronas, as far as I know, has 50% of its turnover coming from non-oil and gas sectors (real estate, banking and securities). It jumps in all projects it thinks it can get profit from.
Petronas would be a good model for PetroVietnam to follow. PetroVietnam hopes to catch up with Petronas in turnover by 2015. Last year, PetroVietnam got the turnover of $14bil, while Petronas, $52bil. However, by 2015, the situation will be different as Dung Quat, Nghi Son and Long Son oil refineries will be operational by that time, and will bring very high turnover.