State-owned Companies Outward Investments Yield Few Profits

SOEs have spent big money on outward investment projects

In 2016, 18 state-owned economic groups and general corporations had overseas investment projects with total capital of $7 billion, according to a report on the use of state capital and assets at enterprises. 

The $7 billion was injected into 110 projects, mostly oil and gas exploration, mining, telecommunications and rubber planting.

PetroVietnam topped the list of investors in terms of capital, amounting to 53 percent of outward investment capital. The holding company and subsidiaries registered to invest $6.68 billion overseas. 

The second position belonged to Viettel, the military telecom group, with $2.13 billion worth of registered capital.

The other big investors include the Vietnam Rubber Group (VRG) with $1.412 billion and Vinacomin which has many mining projects overseas.

More than 46 percent of projects had not reported their revenue and profit as of December 31, 2016.

The number of projects incurring accumulative losses by the end of 2016 accounted for 29 percent. Mor than 25 percent of projects reported losses in 2016. 

An analyst, citing a report that Vietnam made a profit of $145 million in 2016 from overseas projects, said that Vietnamese corporations have not succeeded in offshore investments. The profit Vietnam gained was just equal to 2 percent of the investment capital.

Meanwhile, there were legal risks in many other projects, including land disputes and the shortening of time for project implementation. 

Some projects encountered difficulties because of market price fluctuations, while others had to stop because of the cancellation of the government’s guarantee.

An oil exploitation project in Venezuela run by PetroVietnam is a typical example. The project debuted in 2013, but just three years later, PetroVietnam’s new leadership had to give up the project, though no drop of oil had been exploited, accepting a loss of $500 million.

The Vietnam-Laos Hydropower Company, to which Song Da Corporation makes capital contributions (45 percent of the total charter capital of VND3.25 trillion), had risks and the possibility of losing capital, the Ministry of a Finance warned. 

The company began developing Xekaman 3 hydropower project in Laos, but it had to stop operation because of breakdowns.

Vinacomin, another corporation, also incurred big losses in many projects. 

The government’s inspectors in late 2017 identified unprofitable projects, including the VND111 billion investment in Strung Treng, a mining project in Cambodia, VND184 billion investment in bauxite exploration in Cambodia, and VND77.6 billion investment in Southern Mining Co. It incurred a loss of VND69 billion with its investment in Phu Nhuon iron ore mine in Laos.

US$1=VND22,000

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