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Construction sites are seen among Hanoi's skyline. Once tipped as Southeast Asia’s next economic star, Vietnam has been hit by debt crises at its state-run businesses. (KHAM/REUTERS)
Construction sites are seen among Hanoi's skyline. Once tipped as Southeast Asia’s next economic star, Vietnam has been hit by debt crises at its state-run businesses. (KHAM/REUTERS)

Vietnam’s star fades in wake of debt blowouts Add to ...

Vietnam has been gradually reforming its SOE sector for years, cutting the number of companies to 1,300 from 6,000 since the turn of the century and turning 3,388 firms and their subsidiaries over to the private sector through so-called “equitization”.

But the privatization process has since slowed to a crawl.

Dao Van Hung lost his job at the helm of EVN this year after heavy losses at its telecom unit, shortly before the company and its debts were swallowed up by military-run telecoms rival Viettel. Mr. Hung was ushered back to Vietnam’s industry and trade ministry where he awaits a possible investigation.

Under Mr. Hung, EVN expanded into real estate, telecoms and banking even as the country suffered regular power cuts due to underinvestment in electricity generation.

The industry official who spoke to Reuters said the company’s accounting methods were a mystery even to many of those who work there, with no clarity over whether the losses were derived from its core business or from its new ventures.

A bloated, poorly qualified work force was another big problem, he said.

Despite its other ill-fated business ventures, the bulk of EVN’s debts likely come from its inability to charge high enough prices to cover the costs of generation. Vietnam has among the cheapest power prices in Asia, but that has led to underinvestment and a shaky power supply that hurts business.

Hank Tomlinson, the chairman of the American Chamber of Commerce in Vietnam, said that some foreign-invested beverage firms in Vietnam run their operations on generators the whole time as it works out cheaper than facing supply disruptions.

“What businesses need is available and reliable power, not cheap power that requires generator sets running full-time for backup,” Mr. Tomlinson said.

EVN has raised its electricity prices by 5 per cent this year but a lack of transparency over the reasons for the hikes has generated suspicion among businesses at a time when there has been a surge in bankruptcies due to a tightening of credit.

“Businesses now suffer from so many fluctuations and economic losses, but so far what can we do? We just have to live with it,” said Cao Tien Vi, the chairman of Saigon Paper Corp, adding that EVN had not given warning of its latest price rise.

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