79,000 businesses in 2011, and 18,000 more businesses in the first four months of the year reportedly got dissolved. In such conditions, debt and asset trading has emerged as the highly possible solution to rescue businesses.
The Debt and Asset Trading Corporation (DATC), belonging to the Ministry of Finance, was set up more than 10 years ago. A lot of asset management companies under commercial banks have also been operating for the last many years. However, the role of such companies had not been dignified until recently, when more and more businesses need support to clear their debts and revive production.
Bianfishco, which was heavily indebted and on the verge of bankruptcy, has narrowly escaped the death after DATC agreed to buy its debts, raising the hope of reviving a big seafood brand which has fallen into decay.
Debt trading – the lifebuoy for businesses
The Vietnam Shipbuilding Industry Group (Vinashin), which bogged down in difficulties, also reportedly escaped death narrowly after a conglomerate bought its debts, thus helping Vinashin gradually settle its problems.
DATC has purchased debts of 42 enterprises so far to carry out the plans to restructure the enterprises, including the Son La Sugar Company, Kon Tum Sugar Company and the Transport Work Company No. 677.
Of these, Son La Sugar Company has been rescued after it was put on the verge of bankruptcy and the Son La provincial authorities failed to rescue it with a lot of drastic measures.
The Huy Hoang Garment and Construction was also put on the verge of bankruptcy, but it has revived thanks to the decision allowing it to extend the debt payment for three year.
To date, DATC has purchased nearly 7 trillion dong worth of debts, 90 percent of which were the debts of state owned commercial banks
Experts have pointed out that a lot of enterprises which died recently could have been rescued if they had not lacked information and could approach debt trading institutions. The enterprises could have contacted the institutions to persuade the institutions that their difficulties were just temporary and that they could revive and pay all the debts, if their debts can be cleared.
Cao Tien Vi, President and general director of the Saigon Paper Company, said that the debt trade demand has always been high on the market. However, the problem is that the debt trading activities have not been professionalised.
Supply profuse, demand deficient
Despite the profuse supply of debts for sale, which can be reflected in the high number of 90,000 businesses dissolved in the last 16 months, the debt trading market in Vietnam remains weak.
Dr Le Dang Doanh, a well-known economist, has noted that on the debt market, there is supply, but the demand is yet to get ready. DATC alone with the modest chartered capital of 2 trillion dong would not be able to satisfy the demand of a lot of businesses which have “one foot in the grave”.
Dr Dinh The Hien, an economist, also said that DATC is not powerful enough to satisfy the demand for business restructuring. Therefore, he believes that it would be better to call on foreign investors and institutions to join the domestic debt market. Especially, he emphasized the need of laying down a transparent legal framework for debt trading.
The economists have agreed that in some special cases, the State needs to make technical intervention in the cases and supervise the debt trading in order to minimise the losses. This is the way some countries like the US or Japan have followed.