VCN- Losses from investment outside the industry have been a "hot" story with many "big" State-owned enterprises recently. Meanwhile, some private companies expand their investments in new areas, far from the traditional ones, which is very positive.
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Light and dark
Private business community in Vietnam is still quite immature. Previously, Vietnam focused more on the 100% State-owned enterprises with an orientation to make them become the "leaders" for economic development. But in fact, they had the wrong direction with investment outside the industry in many areas, leading to losses with "terrible numbers”. Meanwhile, the private sector has been identified as a driving force for economic development with successful investment direction, including Vingroup, FLC, TH True Milk, SunGroup, Hoa Phat, Truong Hai, Mobile World, etc.
In general, these big names are on the way to success, and their other investment fields in the traditional fields have initially been profitable. The most prominent example is the case of Vietnam's largest privately-owned enterprise, Vingroup (according to the results of Vietnam's 500 largest private enterprises in 2017). Vingroup's net revenues reached VND 90,355 billion, an increase of 57%, net profit was VND 5,440 billion, an increase of 55% over the previous year. In the fourth quarter of 2017, hotel and resort services accounted for VND 1,524 billion, an increase of 112.3% over the same period last year; Turnover of real estate investment in retail centers of Vincom Retail reached VND 1,150 billion, and retail sales reached 3,896 billion. Revenues from educational services at Vinschool schools reached VND 346 billion, and revenue from hospital services and related services at Vinmec hospitals and clinics reached VND 636 billion.
Contrary to the positive revenue situation of private enterprises, State-owned enterprises (SOEs) when investing outside the sector suffered losses, including Vietnam Rubber Industry Group, Vietnam National Coal-Mineral Industries Group, Vietnam National Shipping Lines.
The "dark picture" of SOEs is Sabeco, with a loss of more than VND 440 billion when investing capital into 10 long-term projects, such as banking and finance which has been recently pointed out by the State Audit of Vietnam. In addition, the most damaging are the 13 unsuccessful projects of the Ministry of Industry and Trade, with damages amounting to trillions of VND. The project of Ninh Binh Fertilizer Plant has accumulated losses of more than VND 1,700 billion in the period 2012-2014, followed by losses of billions of VND in the following years. Dung Quat Ethanol Plant is also carrying a loan of up to VND 1 trillion, but not yet able to pay. With the drastic increase of management agencies, the operation is gradually becoming profitable, but many projects still suffer from "delay", and there is no specific solution to restart.
Therefore, in recent years, the management agencies had to revise the status of investment outside the sector of SOEs, requiring these companies to withdraw capital to focus on the main production and business fields which have been promulgated by the Government. However, the effect that these "big" SOEs has caused until now still continues, negatively affecting the current financial situation. .
Need a new investment strategy
According to Dao Huy Giam, General Secretary of the Vietnam Private Sector Forum (VPFS), over time, Vietnam's large private corporations in the process of development have accumulated resources such as relationships, management capacity, human resources, access to technology, relationships with partners in other fields. The development of multi-sector and multi-field is the inevitable rule. Of course, this process will be slow, not easy for these companies in a short time. Therefore, they can be called as "startups" in such new areas.
However, whether private enterprises or State-owned enterprises, according to experts, the development of multi-sector and multi-field has two aspects. The story of Hoang Anh Gia Lai is an example. Previously, this company invested in many fields, but after a period of time, it had to restructure the company, divesting capital, narrowing down the production area to focus on two main sectors including agriculture and real estate. Similarly, Hung Vuong Aquatic Group, with its ambition to build a multi-sectoral "empire", has been steadily declining due to the expansion of the project and increased investment in new sectors.
Therefore, Mr. Dao Huy Giam said that it was important that when enterprises accumulated resources at a certain stage, they must consider which resources are the key. Enterprises are generally weak in the market. Because Vietnamese enterprises often simplify the problems of standards, quality, technology and strength of other enterprises, they can be prone to failure. Therefore, domestic enterprises must find ways to link together and control the business field and to not deviate. Thus, the regulatory authorities must also facilitate healthy business and consult enterprises.
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It can be seen that the multi-sector investment story is of concern, so the solution is to find ways to avoid the previous "mistakes" of businesses. It is praiseworthy that the private business community has been recognized by the regulators as the driving force for economic development, so there will be more support for the business environment. Therefore, the selection of investment direction and development of the private sector will be more favorable, and if the direction is right, the economic sectors of Vietnam will have strong development, affirming theVietnamese brand position.
By Binh Nam/ Hoang Anh