More state firms may be forced to withdraw from new bank start ups
08-AUG-2008 Intellasia | Thoi Bao Kinh Te Vietnam
Aug 8, 2008 - 7:00:00 AM
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On June 22, 2006, the Decision No 147/2006/QD-TTg approving the project of piloting the setting up of Electricity of Vietnam under the group model was issued. Under it, EVN was allowed to operate in main fields of producing and trading electricity, electrical engineering, and also get licenses in multi-sectoral businesses including transportation to serve non-ore materials production, trading and mining, information technology service trading, and investment in finance, securities, banking and insurance.
Following EVN was a series of other groups being established under such a multi-sectoral model, which helped these groups expand investment between the end of 2006 and the start of 2008.
Although the consulting and critic process of relevant agencies to date has not been unclear, the multi-sectoral investments of state groups like EVN factually were legalised just initially.
In the last year end, there were eight established groups while the initial purpose was that "the setting up of economic groups was on trial only". Meanwhile, a slew of state corporations also were asking approval to form groups. At least four other corporations reported building up particular drafts considering "multi-sectoral development" as a new development direction.
Addressing at a conference on developing economic groups held in late 2007, Pham Thanh Binh, Chair of Vietnam Shipbuilding Industry Group said, we defined such main activities as shipbuilding and seagoing transportation. But first off, his group will study investments in sectors of energy, cement production, multi-method transportation services, industry, airline, insurance, securities, banking and real estate. At the moment, perhaps he had another point of view.
According to Dr Vo Tri Thanh, head of the International Economic Integration Department under the Central Economic Management Research Institute stated " state groups and corporations were aware of catching business opportunities, which is considered seriously to be an economic phenomenon."
Replying the press, Pham Chi Lan, ex-member of prime minister's Research Committee said that in principle, the diversification of corporate operation must be for supporting core businesses. However, non-core investments of state groups and corporations now are regarded as one of main reasons causing economic difficulties at present. State groups are hard to succeed as entering severely competitive non-core investment and business sectors whereas they can neglect core investments.
Most recently, Vietnam Oil and Gas Group withdrew capital from Hong Viet Bank with the proper pretext that they were complying the government's requirement to curb inflation and cut state project investment. Yet, according to some specialists, the information seemed to be forecasted in advance after the investment in Hong Viet Bank could not be profitable as expected anymore.
Whether will there other banks like Hong Viet in the next time? Because state economic groups will have to re-consider previous plans. A series of new banks (including Energy Bank, Van Phong Bank, Viet Tin Bank) asking State Bank of Vietnam's approval have not found out "exit" while their main shareholders that are state groups and corporations could withdraw capital.
In such context, Ministry of Construction recently submitted a document proposing prime minister to allow the Housing and Urban Development Corp (HUD) to contribute capital in the establishment of Dong Duong Thuong Tin Commercial Joint Stock Bank. The contribution is estimated at 30 billion dong, accounting for 3% of the forthcoming bank's chartered capital, a very small figure in HUD's total investments. But the proposal is not opportune in the current situation although a necessary regulation on non-core investment of state businesses has not been promulgated. In principle, HUD could obtain the prime minister's permission.
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