Prime Minister Nguyen Tan Dung has again ordered PetroVietnam to divest from non-core businesses investments.
It follows an inspection that revealed the group’s return on investment in these businesses was much lower than its oil and gas business.
PetroVietnam must “review all investments outside its core business and effectiveness of these investments” and “making a roadmap for reasonable divestment to avoid losses”, the prime minister said in an announcement released by Government Office last month.
The State Inspection Agency highlighted that PetroVietnam’s return on investment in its oil and gas business during the past five years was 28.75 per cent. Meanwhile, the rate in other businesses such as banking and finance, insurance and property was 2.82 per cent.
“PetroVietnam’s investments into affiliate companies and long-term investments in supporting industries, finance, insurance, banking and property is significant less profitable than investments in 100 per cent state-owed companies and in the oil and gas business,” the State Inspection Agency said.
PetroVietnam is Vietnam’s largest economic group and contributes to one-third of the state budget.
Till December 31, 2010, the group’s total assets were $22.4 billion. The group’s revenue during 2006-2010 was $33.1 billion and after- tax profit was $6.2 billion, according to the State Inspection Agency.
However, like many other state-owned enterprises, the group expanded its footprint in other business including electricity generation, property and finance. Early this year, the government forced PetroVietnam to withdraw from Vietnam’s tallest skyscraper project in Hanoi.
PetroVietnam had seven wholly-owned subsidiaries. Furthermore, it held majority stakes at 11 companies and has stakes at seven other joint ventures in 2010. State Inspection Agency vice head Ngo Van Khanh said the divestment from non-core businesses would enhance PetroVietnam’s core business.
The State Inspection Agency found PetroVietnam incorrectly used $750 million from profits at Vietsovpetro, a joint venture with Russian partner, to invest in three projects. Dung asked PetroVietnam to work with the Ministry of Finance to address the mistake.