Business

New decree to come out to handle bad debts at SOEs The Ministry of Finance will present to the Government a decree on handling bad debts at State-owned enterprises (SOEs) which will serve as a legal basis to require enterprises to classify debts and better handle bad debts. According to the ministry’s report sent to the Government last week, the new decree will replace Decree 69 to be more suitable with the current situation, especially to classify debts for easier settlement so as to avoid crashes in a domino effect. Decree 69 on managing and handling unpaid debts at State-owned enterprises was issued by the Government in 2002. However, debt management mechanisms as well as debt payment responsibility of enterprises have shown inadequacies in recent years with many enterprises incurring losses, becoming insolvent and threatened with bankruptcy like Vinashin and Vinalines. According to the National Steering Committee for Enterprise Reform and Development, liabilities of State groups and corporations as of January had reached VND1.330 trillion, or roughly US$65 billion. Meanwhile, although the average debt-to-equity ratio was 1.82% and still within the permitted level, the situation at certain groups and corporations was alarming, with some having debt-to-equity ratios several times higher than the limit, not to mention those having foreign debts like Vietnam Electricity Group and Vietnam Expressway Corporation. It is noteworthy that financial conditions of many groups and corporations are unhealthy. Some fail to maintain equity or have low equity-to-capital ratios. Besides, many others rely heavily on bank loans, resulting in insolvency and making them unable to control liabilities. There have been 66 State groups and corporations drawing up restructuring plans. Among these, 44 enterprises have had their restructuring plans approved, according to the Ministry of Finance. Source: SGT