VINACHEM

VietNamNet Bridge – The profits made by the state owned conglomerates operating in the key business fields are believed to be undeserving to the huge capital and power given to them.

The fact that state owned conglomerates like VNPT, Viettel or Petrolimex reported the large profits of trillions of dong in 2013 was not a surprise to anyone.

Vu Dinh Anh, a well-known economist, commented that the state owned economic groups need to make profit once they enjoy the monopoly in their business fields and can use the state’s huge capital and land.

However, a question has been raised that how the state owned economic groups made profits. Did the profit come from the good business management or from the selling price increases?

Analysts have commented that it is easy for the economic groups to make profit by raising the selling prices, because they are the only goods and service suppliers in their fields.

In principle, the businesses in a market economy try not to raise the retail prices because they have to compete fiercely with others to scramble for customers. But state owned enterprises, the only players on the playing fields, who cannot have to compete any other else, don’t fear they would lose customers. Electricity users, for example, only have one choice – signing the contracts with the Electricity of Vietnam.

Therefore, Anh said it is necessary to keep a way of approaching the state owned conglomerates’ profit different from other normal businesses. In many cases, the profits gained by state owned enterprises come from the privileges given to them by the State.

Also according to Anh, the state seems to give too many favors to the state owned conglomerates. Rubber and coal groups, for example, continuously asked for the export tariff reductions any times when they meet difficulties due to the world’s price fluctuations. And they claims would be satisfied by the Ministry of Finance.

The export tariff on rubber, for example, has been cut by 2-4 percent since December 26, 2013, after the Vietnam Rubber Group complained about the difficulties.

As for coal, the Vietnam Coal and Mineral Industries in 2013 both got the nod for the domestic price increases and for the export tariff cut.

The tax adjustments surely helped the state owned groups make fat profits.

Commenting about the move, analysts said that the state overindulged the two economic groups, and that this does not mean it created favorable conditions for the groups to improve their business performance.

Agreeing with Anh, Secretary General of the Vietnam Financial Investors’ Association (VAFI), pointed out that the profits made by Petrolimex and EVN, the only petroleum and electricity suppliers, are in fact, not high as people think, if compared with the stockholder equities.

It is the monopoly enjoyed by the state owned conglomerates which brings them such high profits. Despite the high business costs, the conglomerates still can make profit, because they can raise the selling prices to offset the high expenses.

The big guys in the telecom sector, according to Hai, always make fat profits thanks to the bad management of the state agencies. Hai believes that telcos need to ask for the permission from the Ministry of Finance for the service fee increases, while the Ministry of Information and Communication should only be in charge of controlling the service quality.