VietNamNet Bridge – Having powerful financial capability and enjoying privileges as state owned enterprises, they still want more power, more capital and more privileges.

The Debt and Asset Trading Corporation (DATC), a powerful corporation belonging to the Ministry of Finance (MOF) has sent words intimating that it wants to become a corporation put under the direct control from the government.

Pham Manh Thuong, Deputy General Director of DATC, has confirmed this, saying that it is necessary to upgrade the DATC’s operation scale, increase capital and reconsider the operation model. Especially, the corporation should be the national corporation in charge of dealing with bad debts to be put under the government’s management.

DATC is also seeking the permission to increase its chartered capital, and asking for the right to issue government-guaranteed bonds which would be used to buy debts from credit institutions, according to Thoi bao Kinh te Saigon.

Thuong has also mentioned the necessity of the establishment of some joint stock companies with the chartered capital of VND2 trillion in total, in which DATC would hold 36-49 percent of stakes. These would help attract more capital from different sources in the economy to the bad debt settlement activities.

By mid-2012, the bad debts of foreign credit institutions had reportedly reached VND6.719 trillion, or 3.56 percent of the total bad debts of the whole banking system.

By the same time, the bad debt of Vietnamese credit institutions had reached VND182.242 trillion, accounting for 9 percent of the total outstanding loans and 96.44 percent of the total bad debts of the whole banking system.

The “Vietnamese credit institutions” include the state owned banks, in which the state holds 100 percent of stakes or controlling stakes, joint stock banks, finance companies, finance leasing companies and the central people’s credit fund.

Thuong believes that it is necessary to gather strength to settle the bad debts of the state owned banks whose bad debts account for 48.6 percent of the total bad debts.

A high proportion of the banks’ bad debts relates to real estate projects. Meanwhile, the real estate market keeps gloomy, which means that the debts would be irrecoverable.

According to DATC, the profitability of the credit institutions in Vietnam is relatively low if compared with the risks and with the profitability of the banks in the region and the world.

In 2011, the ROEs (return on equity) were 4.23 percent for state owned banks, 1.95 percent for joint stock banks, 1.9 percent for joint venture and foreign banks. Meanwhile, the indexes were 25.9 percent in Indonesia, 18.9 percent in Malaysia, 13.3 percent in the Philippines, and 13.6 percent in Thailand.

The Electricity of Vietnam (EVN), the biggest investor in the power sector and the only wholesale buyer, has recently also asked for special mechanisms in the matters relating to the domestic or international bond issuance and the procedures for negotiating with foreign investors about power generation projects under the BOT mode (build, operation, transfer).

Analysts have commented that while DATC and EVN target different goals when asking for bigger power, they have the same characteristic – the business is unsatisfactory.

The State Audit has warned that DATC has been using capital ineffectively. Meanwhile, EVN’s rate of return on investment capital is low at 1-2 percent, which is equal to 1/5 of the profit to be expected if it deposits the money at banks, according to Dai Doan Ket.