Industry and Energy Investment Fund, the biggest domestic fund of a capital size of 10 trillion dong in Vietnam with the contribution of many state groups and corporations officially went under liquidation. According to Vietnam National Oil and Gas Group (PetroVietnam), the government ordered state groups and corporations to reduce their capital from the fund and focus on core business production sectors.
Statistics showed that total capital that state corporations and groups invested in finance reached 7.999 trillion dong in 2006, 18.279 trillion dong in 2007 and 25.706 trillion dong in late 2008. Some groups posted a huge financial investment capital, like PetroVietnam with 5.494 trillion dong in 2008, Vinashin 3.308 trillion dong, and Electricity of Vietnam (EVN) 2.146 trillion dong.
Industry and Energy Investment Fund was formed by Bank for Investment and Development of Vietnam (Bidv) in coordination with PEtroVietnam, Vinacomin, VNPT, Song Da Corp, Idico and others. Ownership ratio of these corporations and groups accounted for 80 percent of the fund’s charter capital. Lately, according to State Securities Commission’s decision, the fund was put into realisation.
Phan Thi Hoa, member of PetroVietnam director board said that the realisation of Industry and Energy Investment Fund would be conducted in line with the government’s order that the state groups and corporations like PetroVietnam are disallowed to invest in non-core fields any more. Also, PetroVietnam has to reduce capital from financial investment through internal rearrangement, particularly its contribution in Aircraft Leasing Investment JSC was transferred to PVFC, holding in Petrol Union Investment JSC handed over to PVFC as well, and capital holding in Petrol Joint Stock Co and PV Media will be transferred to PVI.
Especially, PetroVietnam is allowed to continue keeping financial investment items in PVFC and PVI. Being a multi-sectoral group, we will not invest in the sectors not relating to petroleum, Hoa confirmed.
Meanwhile, Vietnam National Shipbuilding Industry Group (Vinashin) withdrew financial investment capital from Bao Viet insurance holding pursuant to the government’s order. To become a shareholder of Bao Viet, Vinashin two years ago spent 1.467 trillion dong (over $90 million at that time) to own 3.56 percent. Currently, Vinashin’s investment in BVH was transferred to State Capital Investment Corp (SCIC) according to the initial investment price and SCIC rejected to reveal further details about the deal.
Similarly, specialists assessed that the financial investment efficiency of groups and corporations did not reach expected results. Most groups and corporations all saw losses or small profits in securities investment and capital contribution to investment funds. In particular, EVN posted a loss of 30 billion dong among total 214 billion invested in securities last year, Vinatex could not earn profit from 24 billion dong of stock investment, PetroVietnam contributed 368.9 billion dong to the setting up of investment funds, and Vietnam Rubber Group pumping 271 billion dong, Vinashin financed 144 billion dong in funds. All of capital items were not profitable till late 2008. In fact, the majority of investment capital of state groups and corporations were originated from two years of 2006-2007 when the stock market witnessed a bubble development. Thus, the investment efficiency of these enterprises was lower than their general business effectiveness. Even many of them lost much money.
Capital contribution or withdrawal is normal in investment but state groups and corporations play the very important role in the economic growth. The government’s decision on controlling the non-core investments of state giants will indirectly help the stock market develop more healthily by idle capital sources.