Dark and bright picture after equitization: Part 1: Behind the figure of 13% of loss-making businesses

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	Mobilising revenues from equitisation and divestment to State budget

The operation of SOEs and enterprises after equitization still tended to grow steadily. Photo: ST

The operation of a state-owned enterprise (SOE) can be compared to a colorful picture. In this picture, total assets, equity, total revenue, interest before taxes and the amount of money to the state budget all grow, which is the clearest evidence for the effective operation of state-owned enterprises,especially enterprises after equitization and divestment. However, the ratio of dark areas with losses and debts is not small.

There is growth

At the end of the fiscal year 2018 (announced by the Ministry of Finance at the end of 2019), the whole country had a total of 855 SOEs, including 505 state-owned enterprises with 100% of charter capital; 350 enterprises have shares and contributed capital of the State. According to the report of the representative agencies, the total state capital invested in 855 enterprises was VND1.53 million, up 6% compared to the implementation of the fiscal year 2017. In particular, 100% state-owned enterprises are VND1.36 million; State-owned enterprises are VND164,134 trillion. Total assets of state-owned enterprises reached VND3.71 million, up 2% compared to the previous year. Meanwhile, 505 SOEs holding 100% capital had total assets of VND2.9 million, up 2%. The proportion of fixed assets on average accounts for 39% of total assets. And the equity of SOEs is over VND1.3 trillion, up 5%.

Also, according to the statistics, in the fiscal year 2018, the total revenue of SOEs reached VND1.56 trillion, up 9%,profit before tax of SOEs reached VND165,752 trillion, up 3%. The average profit before tax ratio of SOEs in 2018 is 12%. The average profit before tax ratio of SOEs in 2018 was 6%. These two ratios are equivalent to 2017.

Mr. Dang Quyet Tien, Director of the Department of Corporate Finance, Ministry of Finance added: In 2018, SOEs paid nearly VND268 trillion to the state budget, an increase of 5% compared to the performance in 2017. This was mainly revenues from domestic business, accounting for 76% of the total amount arising of SOEs' budget. These figures prove that the operation of SOEs and enterprises after equitization still tends to grow steadily; the proportion of state capital contributed in joint stock companies tends to shift in association with the process of restructuring and equitization of SOEs. The state holds more than 50% of charter capital in 180 joint-stock enterprises, mainly concentrated in large corporations and suppliers, public products and services after implementation of equitization.

Agreeing with the results mentioned above, Mr. Nguyen Hong Hien, Director of Infrastructure Technology Department, State Capital Management Committee at the enterprise said that although there are still many obstacles, the fact shows that the restructuring has helped many SOEs achieve positive changes with surprising business results.

A conspicuous example is that the Vietnam Post and Telecommunications Group (VNPT), after five years of restructuring, has transformed from a pure telecommunications business to a telecommunication - technology business. In recent years, VNPT has maintained an average profit growth rate of over 20% per year, total revenue of more than VND265.8 billion.

Or Vinamilk, in 2003 conducted equitization, in 2006 listed on the stock market, from an enterprise with a capital of VND1,590 billion, after 18 years of capitalization of the enterprise has reached VND202,907 billion, increasing by up to 200 times. Vinamilk's business results in 2019 recorded VND56,400 billion in revenue and VND12,796 billion inprofit before tax.

Hanoi Trade Corporation - Joint Stock Company (Hapro) is also a typical "bright spot" after equitization. In 2019, its profit before tax reached VND141 billion, 6.5 times higher than in 2018 and 10 times higher than in 2017 (the year before equitization). Total export turnover of Hapro reached nearly US$60 million with over 40,000 tons of all kinds of goods.

Another view

The overall assessment is quite positive, but it also needs to be frankly acknowledged that many businesses still exist and many projects have bad business situations, causing losses and waste. Such as Song Da Corporation - Joint Stock Company,this enterprise officially transformed into a joint stock company from April 6, 2018. By the end of 2019, Song Da's liabilities amounted to VND20,148 billion. Compared to 2018, indicators of revenue and profit recorded a decrease. Specifically, sales of goods and services decreased by VND612 billion; gross profit decreased by VND329 billion; profit after tax decreased by VND33 billion.

Quy Nhon Portwas a typical example. The equitization of this business started in July 2013. Thinking about being in the planning of seaport system to implement "Vietnam Sea Strategy" till 2020; with the huge assets, the equitization of Quy Nhon Port will be a big deal, bringing many benefits to the State. However, perhaps due to the great benefits that led to the process of equitization of this enterprise, many mistakes occurred. In a short time, a port turned state-owned capital quickly became 100% private capital with too cheap a price. In the notice of conclusions on inspection of the equitization of Quy Nhon Port, dated September 17, 2018, of the Government Inspectorate, specified: In the equitization and divestment of state capital at Quy Nhon Port, the Ministry of Transport, Vinalines, Equitization Steering Committee, Assisting Team, Quy Nhon Port Company Limited and relevant agencies and units have let many defects and violations.

Around this issue, leaders of the Department of Corporate Finance, Ministry of Finance shared a few figures: In 2018, 110 of 855 enterprises had unprofitable business results, accounting for 13% of the total SOEs. The group of corporations, holding companies and the parent company has total liabilities according to the consolidated reporting data of VND351,733 trillion, accounting for 88.6% of the total liabilities of the joint stock enterprises. According to the consolidated report of joint stock companies, there are 59 enterprises with the total losses incurred of VND3.2 trillion. In the parent company alone, three companies have incurred losses with a value of nearly VND2.4 trillion.

The reporting of supervision of the owners to the business is still not serious. There is a delay in sending reports on financial supervision results to SOEs and state-owned enterprises.

Some other shortcomings are that after equitization, many businesses are slow to register for trading and listing on the stock market, affecting the openness and transparency of the market. At the same time, it is slow to renovate corporate governance after equitization according to the practices and standards of enterprises in the stock market, as well as restrict the supervision of society to the activities of enterprises.

Equitisation vital for stock market growth The successful equitisation and capital divestment of State owned enterprises SOEs would create benefits that boosted the ...

At the 8th National Assembly (October 2019), the National Assembly's Economic Committee made a verification report on the investment, management and use of state capital in enterprises nationwide throughout the year 2018. In which, it is suggested to clarify responsibilities and strictly handle in accordance with the law of violations of related organizations and individuals to occur the situation of SOEs, investment projects that suffer from losses and waste without using the state budget to handle losses of enterprises.