Businesses at risk of bankruptcy due to suspended projects

Pay bank interest for suspended project

According to Mr. Dang Anh Tu, General Director of Saigon 5 Real Estate Development Joint Stock Company (Saigon 5 Company), the company has officially transformed into a joint stock company since September 1, 2016, but the state still holds 99.78% of the charter capital, equivalent to VND 362,154 billion. The remaining proportion belongs to the company's officers and employees.

All projects of Saigon 5 Real Estate Development Joint Stock Company are at a standstill.

Since the conversion, the company has encountered many difficulties in production and business activities. The reason is that all projects under the equitization plan approved by the Ho Chi Minh City People's Committee have been stuck in the process of land valuation, enterprise valuation and prolonged settlement of conversion, so they cannot be implemented, seriously affecting the material and spiritual life of workers. Currently, nearly half of the company's employees have quit their jobs. At the same time, it has greatly affected the preservation of state capital in the company.

Mr. Dang Anh Tu said that currently, Saigon 5 Company only has the Binh Dang real estate project in District 8 as the only project that can generate revenue. The company has invested more than 250 billion VND in the project, started construction on February 24, 2018 and has completed the ground floor. However, by July 2019, the project had to be temporarily suspended because the land has not been updated by the Department of Natural Resources and Environment with the new land user name, Saigon 5 Company, on the pink book (currently the pink book is in the name of Saigon 5 Construction and Trade Company Limited). Therefore, the Department of Construction did not issue a permit to build the main part.

During the nearly 3 years the project stopped construction, the company had to pay about 1 billion VND in interest to the bank each month. Up to now, the interest alone is 35.518 billion VND. Meanwhile, the revenue in the first 3 months of 2023 was only 3 billion VND, of which there was a loss of more than 2.2 billion VND. Therefore, the company is financially unbalanced, with no cash flow to pay salaries to employees and repay bank loans. "From a 100% state-owned company operating effectively with high revenue and profit, developing stably for more than 30 years, but when it became a joint stock company until now, all our production and business activities have stagnated. All projects cannot be implemented, workers' lives face many difficulties, many key officials quit their jobs, there is a risk of bankruptcy and loss of state capital. Although the company has asked for help many times, the departments and branches still do not solve the problem. Sometimes we are discouraged and do not want to work anymore," said Mr. Tu.

Must solve difficulties for businesses

It is known that, in order to resolve difficulties for the company and avoid losses of state capital, in mid-2021, the Ho Chi Minh City People's Committee at that time assigned the Department of Natural Resources and Environment to urgently resolve the issue of updating the name change of the land user, Saigon 5 Real Estate Development Joint Stock Company, to the pink book previously issued to Saigon 5 Construction and Trade Company Limited. The implementation time is in May 2021. At the same time, the Department of Construction is assigned to issue a construction permit for the main part of the project. However, up to now, everything has stopped in place.

The Department of Natural Resources and Environment of Ho Chi Minh City believes that the request of Saigon 5 Company to appraise the value of the remaining assets at the time of equitization and update the new name changes on the project's pink book is not within the functions and duties of this department because the Ho Chi Minh City Police requested the Department to provide documents related to a number of premises managed and used by Saigon Real Estate Corporation - LLC, including the land where Saigon 5 Company is implementing the project. However, both the Ho Chi Minh City Police and the City Party Committee's Internal Affairs Committee agreed that the Department of Natural Resources and Environment must continue to follow the above direction of the Ho Chi Minh City People's Committee in the spirit of ensuring compliance with legal regulations.

Recently, on June 1, Vice Chairman of the Ho Chi Minh City People's Committee Bui Xuan Cuong, after meeting with departments and branches, including the Ho Chi Minh City Police and the City Party Committee's Internal Affairs Committee, requested the Department of Natural Resources and Environment to promptly consider and resolve the enterprise's petition according to the direction of the Ho Chi Minh City People's Committee, not to delay, affect or reduce the efficiency of the enterprise's investment capital. Saigon Real Estate Corporation - One Member Co., Ltd. is the owner of the state capital contribution and is responsible for "pumping" capital for Saigon 5 Company to operate.

Ms. Phan Thi Hong, Deputy Director of the Department of Finance, admitted that the biggest difficulty for enterprises is that after equitization, they cannot implement all projects due to problems in price appraisal, determining enterprise value and settling state capital. Therefore, the company has no source of products to sell. This greatly affects the efficiency of using state capital at the company, cannot preserve state capital at the enterprise, loses the ability to pay, has no cash flow to pay salaries to employees and repay bank loans, possibly leading to bankruptcy and loss of state capital. From an effectively operating enterprise, it now faces the risk of ceasing operations, state capital has decreased by more than 20 billion VND and is at risk of decreasing by another 1.3 billion VND per month due to overdue interest at the bank. "Therefore, the Department of Finance recommends that the Ho Chi Minh City People's Committee promptly resolve difficulties for businesses, allowing the Binh Dang commercial service area - apartment project to continue to be implemented again according to the direction of the Ho Chi Minh City People's Committee. At the same time, it recommends that the State Bank of Ho Chi Minh City consider extending the principal and interest payments for businesses," said Ms. Hong.

Since the Binh Dang commercial service - apartment project has been suspended, the company has had to pay about 800 million VND in interest to the bank each month. To date, the interest alone has been nearly 41 billion VND. The company has lost the ability to pay salaries, social insurance for employees and the minimum costs to maintain the company's operations since March 25, 2023.

Ms. Phan Thi Hong , Deputy Director of Ho Chi Minh City Department of Finance

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