Two of the five were ‘saved’ before September 17, when the Debt and Assets Trading Company (DATC) under the Finance Ministry signed contracts with the Bank for Agriculture and Rural Development (Agribank) to purchase the debts totalling VND77 billion (US$4.8 million) of the Son La and Kon Tum sugar companies.

Through the contracts, DATC will restructure the capital sources of those companies and call for strategic investors to contribute capital to help those companies deal with difficulties to meet the conditions of equitisation.

After three years implementing the Prime Minister’s decision on restructuring production and business of the sugar industry, sugar companies have basically completed equitisation.

At present, apart from three companies that have stopped operating, Vietnam has 36 others, including six foreign-invested, 25 equitised and five companies operating at a loss (Son La, Kon Tum, Tra Vinh, Soc Trang and Thoi Binh sugar companies). In the past three years, the government has provided VND1,500 billion ($93.75 million) to solve financial problems for sugar companies. However, according to the PM’s instruction, sugar companies that equitise after 2006 will not be financially supported by the government.

To deal with debts of the above loss-making companies and help them operate effectively, the necessary amount of money is up to thousands of billion dong. The biggest difficulty of those companies at present is their debts to state commercial banks, mainly Agribank and the Vietnam Development Bank (VDB).

At VDB, by December 31, 2006, sugar companies owed up to VND1,156 billion ($72.2 million), including VND173 billion ($10.8 million) of overdue debt and unpaid interest money of around VND130 billion ($8.12 million).

At Agribank, by March 31, 2007, the total outstanding debt balance of 24 sugar companies was VND2,462 billion ($153.8 million), including VND1,180 billion ($73.7 million) of overdue debts.

Pham Phan Quang, Chairman of the Board of Directors of DATC, said that Son La and Kon Tum sugar companies were the first two companies selected to perform the debt settlement and restructuring programme for sugar firms of DATC.

The reason DATC chose them for pilot restructuring is that their existence is very important for the social and economic stability of the northwestern and the Central Highlands regions: they directly influence the lives of thousands of workers and households who are ethnic minority people.

The debtor, Agribank, said that if it didn’t sell the debts of those sugar companies to DATC, the bank would need 15-20 years to recall the debt.

After settling the bad debts of Son La and Kon Tum sugar companies, DATC will deal with the debts of four other sugar firms suggested by Agribank: Tri An, Quang Nam, Kien Giang and Thoi Binh.

Apart from Agribank, DATC is negotiating for purchasing debts of other sugar companies at other credit institutions in order to put a finish to bad debts, restructure and develop sugar firms.