Financial analysis of rubber and sugar factories 

After many years of out-dated business methods, it is estimated that Vietnam's state-owned enterprises are in debt to the tune of DKK 70 billion, mostly to the country’s state-owned banks. This affects every sector of Vietnamese society, including factories producing sugar and rubber, both important trading commodities in the country.

The reason it is difficult to determine just how much money enterprises owe is that the Vietnamese use accounting procedures that are far from transparent. To get an idea of just how large the figure is, the World Bank, together with the Vietnamese Ministry of Finance and bilateral donors, has selected and analysed 100 major state-owned enterprises in debt.

Studies are being made of whether the companies are able to manage their debts without affecting their operational performance. Such information is vital to evaluating the real loss the state-owned banks could sustain. But it is also highly relevant to the World Bank and the donors that have offered to extend loans to the banks to keep them in business.

"By making the enterprises' accounting practices more transparent, it is hoped that the economic reform process under way in Vietnam can continue. But it is also the intention to help the specific enterprises strengthen their operational performance, so that in the long term they can issue shares and perhaps even become listed companies. We hope the state will see the advantages of privatising some of its state-owned enterprises," says COWI Project Manager Poul Michael Fanøe.

Konverterer regnskaber

Converting accounts In February this year, COWI was awarded a project by Danida to analyse ten major enterprises in the rubber and sugar producing industries battling with revenue problems. The project, that has a value of approximately DKK 10 million, will be undertaken together with a local accounting firm.

COWI will convert the companies' accounts to international accounting standards and determine how the companies can improve their operations and strengthen their management skills. COWI will also help them to develop their business plans, which will enhance their long-term competitiveness and creditworthiness.

"An important step along the way to opening up the economy of Vietnam is that the enterprises begin to see themselves as companies that have to be efficiently managed if they are to compete on the international market. This is even more important if they want to take out loans on the private market, where they will need to meet very different requirements for their accounts than they are used to," says Poul Michael Fanøe.

Published 28.05.2002