Thursday, November 01, 2007

Vietnam's state-owned groups treading on each other

Big state-owned corporations and groups are busily reaching their hands out to business fields that are not their fortes.


For example, besides bauxite and aluminum exploitation, the Vietnam Coal and Mineral Group (Vinacomin) has gotten involved in electricity production through the construction of a coal-fueled power plant, the field that belongs to the Electricity of Vietnam (EVN) group.

The Vietnam Oil and Gas Group (PetroVietnam) has also jumped into this area by building a natural gas-fueled power plant. It has also kicked off a five-star hotel, office building project, apart from developing its traditional oil and gas business.

Meanwhile, the Vietnam Shipbuilding Industry Group (Vinashin) and PetroVietnam are reaching their hands out to sea transport business, which is considered the market of the Vietnam Shipping Lines Corporation (Vinalines).

Vinashin recently borrowed money from banks to invest in a beer factory while joining hands with Korean and Japanese partners to design and build ships and establish maritime equipment manufacturing joint ventures.

Big state-owned groups and corporations are not only expanding to the fields of business of small- and medium-size enterprises but to the traditional markets of each other.

They explain that the expansion originates from inner requirements so the diversification of business scope takes place internally and there is no competition between groups and corporations.

However, a senior economist said that it is not as simple as this because this expansion in the form of self-supply can affect the chain connection in the economy.

Former Prime Minister Vo Van Kiet, in a recent article, wrote: "The expansion of economic groups to various fields of business is contrary to the policy 'the state and state-owned businesses will focus on key, essential areas of the economy'. It also disperses the strength and competitiveness of state-owned enterprises and does not help liberate resources held by state-owned enterprises while creates difficulties for the state in controlling those state-owned groups.

"At the same time, these groups hold more market shares, material resources and business opportunities that are precious for the private sector and small- and medium-size enterprises of Vietnam, making these sectors unable to improve their competitiveness and to grow to bring into full play their important roles in the economy," the former Prime Minister writes.

Vice Dean of the Vietnam Economic Institute Tran Dinh Tien also said that although the state doesn't ban economic groups from diversifying their business it is better for them and for the economy if they develop their business based on their available advantages.

"An aviation group must firstly focus on air transport business because its advantage is in air services and it is assigned to develop that market. It should not abuse the strength of a state-owned economic group to conduct securities trading services or grow forests for highest profit," Thien said.

"Even private economic groups in the world don't perform that kind of business because they only grasp opportunities in their fields of business," he added. (TBKTVN)