Current Status of Operations and Performance Evaluation of Vietnam Debt Trading Company (Datc) from 2012 to 2015

In the case of Vietnam, since 2013, the problem of bad debt has received increasing attention due to the continuous increase in bad debt and if there are no timely preventive measures, the problem of bad debt will get out of control.

As of the end of December 2014, the total bad debt of the entire Vietnamese economic sector was:

129,042 billion VND (Bad debt by the end of 2014 = Total outstanding credit to the economy by December 2014: 3,970,548 billion VND x bad debt ratio: 3.25%, official data published on the website of the State Bank of Vietnam, www.sbv.gov.vn). This number is not too large when compared to countries that have suffered from the same disease such as Thailand, Korea... but it is very worrying, the reason is that bad debt has been continuously increasing over the past many years... At this time, besides DATC, almost all commercial banks have established their own debt trading companies, but with limited capital, experience and expertise, they are not yet able to resolve all of the above bad debt. However, according to the Law on Credit Institutions, joint stock commercial banks are not allowed to directly trade in real estate while receiving real estate as collateral is a commonly applied form. With the limitation of the legal framework, most banks, including commercial banks, have difficulty in exploiting the arising profits as well as not being proactive in handling collateral assets, wasting large profits and safe and effective debt collection sources. As a result, the handling of a series of debts must go through the path of lawsuits with a waste of money, time and very low efficiency.

Maybe you are interested!

From the above requirements, it can be seen that improving the operational efficiency of the Vietnam Debt Trading Company to specialize in debt management, bad debt handling and debt restructuring of commercial banks is essential. In other words, an effective national debt trading company under the government is an objective requirement and is based on the legal bases issued by the Government and the State Bank.

In addition, the effective operation of a national debt trading company also contributes to improving the financial situation of debtor companies or businesses. In general, the purchase and handling of bad debt is playing a role.

very important in the economy, it is not only a legal form to handle and rationalize outstanding debts, but also contributes to solving the financial problems of the company in order to accelerate the process of equitization, arrangement, transfer, sale or lease. In addition, this business contributes to creating orientation for the emergence of a number of financial intermediary activities, accelerating the process of forming and developing the stock market, capital market, asset market ... creating more reasonable tools to handle difficulties affecting the financial system of a country in general or each enterprise in the economy in particular.

Finally, if DATC operates more effectively than before, with sufficient capital, supporting SOEs to resolve bad debts to qualify for equitization is something that can be done quickly, in line with the Government's commitments in its efforts to have Vietnam recognized as a market economy.

CHAPTER 1 SUMMARY

In Chapter 1, the author focuses on introducing the general theory of debt trading companies and the theory of the socialist-oriented market economy, thereby clarifying the significance of the activities of debt trading companies in the socialist-oriented market economy, the impact of the socialist-oriented market economy on the activities of Vietnamese debt trading companies. At the same time, the author also introduces the viewpoint of the Vietnamese Government in handling bad debts and orienting the activities of Vietnamese debt trading companies, thereby clearly seeing the unique characteristics of Vietnamese debt trading companies as well as the need to improve the operational efficiency of Vietnamese debt trading companies to suit the socialist-oriented market economy.

From this theoretical orientation, in the following chapters, the author will study how effective the current operations of Vietnamese debt trading companies are, the advantages, disadvantages and limitations in the company's operations in order to propose appropriate solutions and recommendations.

CHAPTER 2: CURRENT STATUS OF OPERATIONS AND PERFORMANCE EVALUATION OF VIETNAM DEBT TRADING COMPANY (DATC) FROM 2012 TO 2015

2.1 Introduction to Vietnam Debt Trading Company (DATC)

2.1.1. General information about Vietnam Debt Trading Company (DATC)

Trading name: Vietnam Debt Trading Company Limited

International trading name: Vietnam Debt and Asset Trading Corporation.

(Because the predecessor of Vietnam Debt Trading Company is Debt and Asset Trading Corporation, English name is Debt and Asset Trading Corporation)

Short name: DATC

Type: State-owned LLC, Managing Ministry: Ministry of Finance.

Charter capital: 6,000 billion VND (increased from 2014, previously DATC's charter capital was 2,481 billion VND, when it was first established it was 2,000 billion VND)

Address: 51 Quang Trung Street, Hai Ba Trung District, Hanoi City.

Phone: (84-04) 39 45 47 38; Fax: (84-04) 39 45 47 37

Website: http://www.datc.vn

Direct legal basis for the Company's operations:

- Decision No. 1494/QD-BTC dated June 30, 2010 of the Minister of Finance on approving the Project to convert the Debt and Asset Trading Company of Enterprises into the Vietnam Debt Trading Company with State ownership.

- Circular 79/2011/TT-BTC dated June 8, 2011 promulgating the Charter of organization and operation of Vietnam Debt Trading One Member Limited Liability Company

- Decision No. 2857/QD-BTC dated November 9, 2012 on promulgating the Financial Management Regulations of Vietnam Debt Trading One Member Co., Ltd.

- Business registration certificate of a one-member LLC, business registration number 0101431355 issued by the Business Registration Office - Department of Planning and Investment of Hanoi City on April 29, 2014.

Company's business lines:

- Purchase, sale, and disposal of debts and assets (including property and land use rights)

land used as security for debts).

- Receive and handle debts and assets that have been excluded from the enterprise value when converting ownership of enterprises in which the State holds 100% of the charter capital.

- Business restructuring associated with business ownership conversion.

- Debt and asset settlement consulting.

- Consulting on buying, selling, merging and restructuring businesses.

- Managing, handling and exploiting assets securing debts, assets assigned to debts and purchased assets, including selling assets, leasing assets, investing in upgrading assets for sale and lease, using assets to contribute capital or form joint ventures and associations.

- Carry out valuation and auction activities in accordance with the law.

- Debt management and collection services.

- Business in other industries according to the provisions of law .

2.1.2. Organizational structure of DATC

DATC is a special-class state-owned enterprise, 100% of which is owned by the State. Up to now, Vietnam Debt Trading and Purchase Company has expanded its branch network in several major cities of our country such as Hanoi, Ho Chi Minh City, Da Nang, creating a network of 12 subsidiaries and 32 affiliated companies throughout Vietnam, in addition to 7 companies with capital contributions from DATC. The company's management apparatus under the Ministry of Finance includes: Board of Members, Controller, General Director, Deputy General Director, Chief Accountant and Support Staff as shown on the company's organizational chart as follows:

Figure 2.1: Organizational chart of DATC

(Source: DATC website: http://datc.vn/portal/Home/gioi-thieu/default.aspx)

2.1.2.1. Ministry of Finance

Vietnam Debt Trading Company is owned by the State. The Government has assigned the Ministry of Finance to exercise the rights and obligations of the owner towards DATC. Thereby, the Ministry of Finance will manage and supervise the activities of Vietnam Debt Trading Company and authorize the Board of Members to directly manage it.

2.1.2.2. Board of members

The Board of Members is appointed by the Minister of Finance with no more than 5 members for a maximum term of 5 years, of which 1 member will be appointed as Chairman of the Board of Members. The Board of Members is the company's management body, on behalf of the owner of the Debt Purchase and Sale Company, to exercise certain rights and obligations of the owner, and is responsible before the law and the owner for the exercise of assigned rights and obligations in accordance with relevant laws.

2.1.2.3. Controller

The Controller of Vietnam Debt Trading Company includes no more than 3 full-time members appointed and dismissed by the Minister of Finance. 1 Controller will be in charge of general matters related to the assignment and coordination of work of the Controllers. The term of office of the Controller shall not exceed 3 years and may be reappointed upon expiration of the term.

The Controller will be responsible before the law and the Ministry of Finance for checking the reasonableness and legality of the Board of Members, Chairman of the Board of Members and General Director when exercising rights and duties in the management of Vietnam Debt Trading Company.

2.1.2.4. General Director

The General Director of Vietnam Debt Trading Company is a member appointed by the Board of Members under the direction of the Minister of Finance for a term of no more than 5 years and may be reappointed upon the end of the term. The General Director of DATC will be the legal representative, directly managing the daily activities of Vietnam Debt Trading Company in accordance with the plans, Resolutions and Decisions of the Board of Members after regular meetings.

The General Director is responsible for effectively using capital resources according to the plan approved by the Board of Members, implementing investment plans, plans to buy, sell and handle outstanding debts, contribute capital, lease or liquidate assets under the authorization of the Board of Members.

2.1.2.5. Staff assisting the General Director

The apparatus assisting the General Director includes the Deputy General Director, Chief Accountant, Office and specialized Departments, Branches, Representative Offices and dependent accounting units.

2.1.3. DATC's operational objectives:

The operational objectives of DATC are clearly stated in the establishment decision of DATC, including the following main contents:

- Support businesses and commercial banks to improve their financial situation during production and business activities through debt and asset trading activities.

- Contribute to resolving financial problems to promote the process of arranging, equitizing, transferring, selling, contracting and leasing enterprises through handling assets and outstanding debts before converting enterprises; handling debts and assets excluded when determining enterprise value.

- Promote the formation and development of the debt market, creating more sources of goods for the financial market. Thereby promoting the synchronous development of market factors in the national economy along with the creation of a legal framework to ensure State management and supervision.

- Build a model and guide the formation and development of a number of intermediary financial institutions (belonging to economic sectors) such as debt trading companies, debt collection services, financial consulting service companies... Thereby, transferring a number of incidental operations from state management agencies to independent, specialized economic organizations.

2.2. Current status, performance results and evaluation of DATC's performance from 2012 - 2015

2.2.1. Current status of debt trading and corporate restructuring activities of DATC from 2012-2015

According to DATC's business performance reports and year-end reports, debt trading and restructuring activities were very active in the 2012-2015 period, especially in 2015 with many breakthroughs, specifically:

In debt trading activities, in 2012, the Company signed 17 contracts with debt value of 704.6 billion VND. Accumulated from 2004 to 2012, DATC implemented 128 debt trading plans in the form of agreement and appointment to handle financial restructuring of enterprises and debt recovery. The book value of the debts was 8,579.6 billion VND, the recovery rate reached 106.5% compared to the debt purchase price.

In the debt trading activities associated with enterprise restructuring in 2012, the Company successfully bought, sold, handled finances, and restructured 9 enterprises, including debt purchase, financial handling, restructuring and converting 5 SOEs into joint stock companies and restructuring 4 joint stock enterprises, which were equitized from SOEs. In the context of general difficulties in 2012, the whole country reorganized 21 enterprises, of which 13 SOEs were equitized, the number of 9 enterprises that DATC restructured above is very impressive and deserves to be recognized. Accumulated from 2007 to 2012, DATC bought debts, handled finances, and

Mainly, restructuring 54 enterprises, of which 28 enterprises were successfully converted into joint stock companies and 26 joint stock enterprises were restructured, which were equitized from state-owned enterprises.

In 2012, DATC continued to be ranked in the Top 1,000 enterprises paying the largest corporate income tax in Vietnam at position 236. In addition, Kontum Sugar Joint Stock Company (KTS) and Son La Sugar Joint Stock Company (SLS), two enterprises that DATC successfully restructured, also entered the ranking at positions 750 and 890, respectively.

In debt trading activities, in 2013, DATC signed 15 contracts with debt value of 1,793 billion VND, reaching 101% of the plan, 2 times higher than the implementation in 2012. In debt trading activities associated with enterprise restructuring in 2013, DATC bought and sold debts, handled finances, and successfully restructured 8 enterprises, thereby helping to convert and equitize 5 SOEs out of a total of 41 SOEs equitized nationwide in 2013 (in 2012, the whole country equitized 13 SOEs, of which DATC restructured 9 enterprises; in 2011, the whole country equitized 16 SOEs, of which DATC restructured 8 enterprises).

In the work of receiving, handling assets and recovering debts excluded from the enterprise value when equitizing state-owned enterprises, in 2013, DATC handled assets and recovered debts excluded from the enterprise value of 39 enterprises, the value of received and handled was 34.4 billion VND, the actual value recovered was 15.1 billion VND, reaching 151% compared to the plan in 2013. Accumulated from 2004 to 2013, DATC handled assets and recovered debts excluded from the enterprise value when equitizing 100% state-owned enterprises, the actual value recovered for the state budget reached 534 billion VND. DATC recovered more than 3,172 billion VND: collected in cash and other forms of collection was 2,463 billion VND, (accounting for 77.6%); Converting debt into equity at 62 enterprises successfully restructured by DATC is 709.3 billion VND (accounting for 22.4%).

In 2013, DATC made a special mark in the debt trading market when it issued domestic and international bonds to restructure the debt of Vietnam Shipbuilding Industry Group (Vinashin), now the Shipbuilding Industry Corporation (SBIC). This was also an unprecedented activity. DATC bond value

Comment