State-run Vietnamese rubber giant Vietnam Rubber Group (VRG) is seeking permission from the Prime Minister to acquire its own finance subsidiary to help cover the VND1.77 trillion (US$83.31 million) losses of the beleaguered company.
The proposal has been criticized by experts as the group will use money from its budget, which is in fact the government’s investment as it is a state company, to handle the financial crisis of the Rubber Finance Company.
The Rubber Finance Company has a chartered capital of VND1.08 trillion ($50.83 million), and assets totaling VND1.63 trillion ($76.72 million), but its losses are now even bigger than its total assets, according to a document the VRG submitted to the Prime Minister.
The finance firm offered loans worth VND1.9 trillion ($89.43 million), but VND1.62 trillion ($76.25 million), or 83 percent, of which has become non-performing.
Most of the borrowers are other units of the group and businesses operating in the realty and securities sectors.
Among the debtors is the Finance Leasing Company No. 2 (ACL II), the finance arm of state-run lender Agribank, whose former general director was sentenced to death in late September for embezzling VND78 billion (nearly $3.7 million) in a corruption case.
The Vietnam Rubber Group is to be held responsible for the troubled operations of its finance arm, according to economic experts.
But the group simply said in the document that it failed to appropriately oversee the Rubber Finance Company due to a lack of experience in the banking and finance sectors.
“Besides, Rubber Finance Company is a newcomer in the industry but it did not receive much support or warning from relevant authorities who already audited or inspected the company,” the document reads.
The VRG concluded that the Rubber Finance Company must be merged with its parent company.
The group will take charge of VND686 billion ($32.29 million) out of the company’s losses and is confident that it can easily “offset the loss with its profits.”
Bui Van Dung, head of the research board on business reform under the Central Institute for Economic Management, said the state-run rubber giant is passing the buck to the Prime Minister.
“Once merged, the Vietnam Rubber Group will use the government capital to handle the losses,” he said.
Dung added that the responsibility of the Vietnam Rubber Group executives in the losses of the financial company must be made clear.
Dr. Pham The Anh, dean of the macro-economy department under Hanoi’s National Economics University, also said the proposed buyout is merely intended to save a debt-ridden company using state money.
“The acquisition should only be done if the Rubber Finance Company were also operating in the same key sector as its parent company,” he said. “Otherwise, we should consider dissolving the firm.”
– Tuoitre
