Business
Economist claims bankruptcy means better chance for enterprises
  • By Bich Diep | dtinews.vn | April 09, 2012 05:18 PM
 >>  Vietnam sees rise in bankruptcies

The Government should set up a fund that could take over the bad debts of bankrupted enterprises to help survive them in difficult situations, an economist said.

 

Economist Dr. Le Dang Doanh

Economist Dr. Le Dang Doanh said the Government could sell their stakes in these enterprises to new employers when the firms overcome their challenging period.

Bankruptcy means better chances

While many people are worried about the prospect for Vietnamese enterprises after nearly 12,000 enterprises filed for bankruptcy in the first quarter of this year, Doanh had another viewpoint of the situation.

“It’s undoubtedly the case many of these enterprises went bankrupt due to incompetence and bad business decisions,” he noted.

In terms of the economy, according to him, bankruptcies offer a better chance for the development of enterprises as it means the same labour force, factories and facilities exist but with better management and more investment. In fact, a bankruptcy indicates a change in the enterprise’s leadership that could help it revive and develop more, he emphasised.

“One of the main weaknesses of Vietnamese enterprises is their lack of professionalism that results in unstrategic investment decisions,” he accessed.

He attributed the current large number of enterprises to the uncontrollable licensing process following the country’s entry to the World Trade Organisation (WTO). Many of them find it hard to survive in current difficult situation due to basic incompetence.

Bad debt fund needed

Some of the bankrupt businesses had operated efficiency, but fallen into their problems as a result of the decrease in purchasing power and export orders. Doanh suggested that the Government as well as banks should study measures to support enterprises in such a situation.

He said that it would not be a good solution to providing these enterprises with capital just to maintain their operations amid huge inventories.

“The Government has recently made policies to switch to using cement for the construction of transportation projects instead of asphalt in order to boost the consumption of locally made cement and steel and lower their inventories. The same move should be taken for other good items,” he recommended.

He emphasised the need to set up a fund to buy bad debts left by bankrupted enterprises for two to three years to help them survive their most challenging period.

“This policy has been applied in several other countries in the world as it facilitates such enterprises to continue to get bank loans and maintain their operations. The Government could privatise such firms and sell their stakes upon their revival,” he attributed.

He noted that careful consideration should be made during the process in order to ensure transparency and efficiency.

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