VietNamNet Bridge - The Vietnam Chamber of Commerce and Industry’s (VCCI) Vietnam Business Annual Report 2015 shows that half of foreign invested enterprises (FIEs) take losses but have the highest ROA (return on assets), ROE (return on equity) and ROS (return on sales) indexes.

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The report shows a higher proportion of unprofitable businesses in recent years in comparison with the previous period, 45.4 percent in 2014 vs 44.8 percent in 2013, even though official statistics showed a strong recovery of the national economy in the two years. 

On average, 33 percent of businesses reported losses in 2007-2014. 

The proportion of unprofitable FIEs is higher than in other economic sectors. The figure was especially high in 2008 with 51.2 percent of FIEs reporting losses.

In other periods, the number of unprofitable FIEs was usually around 50 percent of total FIEs. It once dropped to 44.2 percent in 2010, but rose again to 45 percent in 2011 and has been staying around 50 percent in recent years.

Half of foreign invested enterprises (FIEs) take losses but have the highest ROA (return on assets), ROE (return on equity) and ROS (return on sales) indexes.
Analysts, commenting that taking losses is normal in doing business, said that over 50 percent of unprofitable businesses is ‘abnormal’. Though businesses repeatedly report losses, they still continue expanding production and business in Vietnam.

Meanwhile, if measuring FIEs’ business performance with ROA, ROE and ROS, the FIEs’ profitability level is higher than that of private businesses and state-owned enterprises (SOEs).

As for ROA, the index for FIEs is always higher than the others, ranging between 11.5 percent and 12.8 percent, which is double that of SOEs and 2-3 times higher than the average level. In 2012, the average ROA of all enterprises in Vietnam was 6 percent.

Regarding the ROS, in 2007-2009, FIEs  higher than other enterprises, though it has been on the decrease in recent years.

With 100 dong of revenue, FIEs can pocket 10-12 dong of profit, while SOEs 7-8 dong and others 4-5 dong only.

The ROE index also shows that FIEs are the enterprises which use capital most effectively. FIE’s ROE was about 25 percent in 2007-2014. Meanwhile, SOEs can make 16 dong of profit from every 100 dong of stockholder equity. 

It is questioned by analysts why FIEs still take losses despite their high business efficiency and say they make profits in reality, which are pocketed by their holding groups overseas.


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