Positive changes in outward investment of state owned enterprises


Positive changes in outward investment of state-owned enterprises
The fields of outward investment are mainly in the following fields: oil and gas; telecommunication; planting and processing rubber latex. Photo: Internet

In 2021, many offshore investment projects of SOEs and state-owned enterprises recorded high revenue and profits compared to 2020, however, there are still cases that suffer from incurred losses.

To improve efficiency, the Government will focus on restructuring outward investment activities.

88 offshore investment projects generate revenue

The Government’s report on investment, management and use of state capital in enterprises nationwide in 2021 shows that, as of December 31, 2021, 30 state-owned enterprises and enterprises with state capital have invested in 137 projects abroad in the form of direct investment and investment through tier-1 and tier-2 subsidiaries. There were 26 countries and territories receiving investment projects of state-owned enterprises SOEs.

Investment abroad is mainly in the fields of oil and gas; telecommunication; rubber latex cultivation and processing and other fields (mineral extraction; agriculture; construction and installation, commerce, air transport).

In which, oil and gas, telecommunications and rubber latex planting and processing of the three groups head the lists, accounting for 96% of the total investment capital abroad.

Regarding capital recovery, the Government’s report said that in 2021, the amount of capital recovered from overseas investment projects was 509.75 million USD, of which the profit repatriated to the home country was 278.56 million USD, mainly from projects of Groups and Corporations such as PVN (288.34 million USD), Viettel (147.12 million USD), Aviation Corporation (35 million USD), VRG (US$ 147.12 million), Electricity Group (8.3 million USD), the remaining six enterprises recovered 1.56 million USD.

Accumulated to December 31, 2021, 62 offshore investment projects of 14 enterprises have recovered investment capital with a total accumulated recovered capital of 3,641.43 million USD (including profit repatriated is 1,744.5 million USD), equal to 55% of the total capital invested abroad.

In 2021, 88 overseas investment projects generated revenue with a total revenue of 7,786.56 million USD, an increase of 40% compared to 2020. Of which, 62 profitable projects recorded a total profit after tax of 810.2 million USD, an increase of 90% compared to 2020.

87% of losses from projects in the telecommunications sector

However, besides the reported profit projects, the Government said there were still 30 loss-making projects with a total loss of $335.53 million in the year, up 42% compared to the losses of other reported cases in 2020.

Losses from projects in the telecommunications sector (eight telecommunications projects suffered losses with a total loss of 293.32 million USD, accounting for 87%). These failures are mainly from exchange rate differences of unfulfilled projects in the Myanmar market of Viettel (246.98 million USD) due to the political fluctuations.

Moreover, the government’s policy of tightening the management of subscriber information and high taxes and fees in Tanzania have resulted in a fluctuating exchange rate and business loss in the Tanzania market of 43.93 million USD. Thus, by the end of 2021, there were still 44 projects with total accumulated losses of USD 1,335.10 million, down two projects but an increase of USD 164.04 million compared to 2020.

According to the Government’s assessment, in 2021, many overseas investment projects recorded positive changes with increased revenue and profit compared to 2020 (up 40% and 90% respectively). The share in the year of Vietnamese investors also increased compared to 2020 (2.4 times in 2020). The results of capital recovery to Vietnam of projects increased sharply (up 261 million USD), 2 times higher than in 2020.

Given the effectiveness of projects, such factors as economic, political, and social fluctuations and security and safety in the investment areas; a number of high-risk investment fields (petroleum exploration, mining, etc.); the mechanisms, policies and investment law changes in counterpart countries have impeded the implementations of the projects.

On the other hand, the lack of transparency and consistency in the law of some countries in addition to the limited ability to forecast and build investment projects which are unable to predict all the arising problems have been our current weakness. As a result, failed outward investment projects continue to sufer from increasing accumulated losses.

In order to improve the efficiency of outward investment, the Government proposes to the National Assembly to promote state-level diplomatic relations between Vietnam and countries that receive investment capital from SOEs and state-owned enterprises (such as in Laos, Cambodia, and Myanmar). At the same time, it is necessary to propose the host country have consistent and transparent preferential and investment policies, creating a stable and safe investment environment for Vietnamese enterprises.

Along with that, the Government also pays more attention to restructuring overseas investment activities of enterprises in the overall implementation of the enterprise restructuring project for the period of 2021 – 2025; strengthening the management and supervision of outward investment activities to return home profits of enterprises; strictly implement the regime of reporting and evaluating the effectiveness of using outward investment capital according to regulations.

By the end of 2021, the total outward investment capital of projects was 6,615.45 million USD (equivalent to 55% of the registered capital), in which, the Vietnam Oil and Gas Group (PVN) had the top position (US$3,992.28 million, accounting for 60% of the total investment capital); followed by Military Industry – Telecommunications Group (Viettel) with $1,469.94 million, accounting for 22%; Vietnam Rubber Group (VRG) ranked third (770.80 million USD, accounting for 12%). The total outward investment capital of these three enterprises accounted for 94% of the total outward investment capital of SOEs and state-owned enterprises.

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