Deal with equitization and divestment in State enterprises

Investors might seek investment opportunities in SOEs and State-owned capital enterprises when Decision 58/2016/QD-TTg is issued. Photo: Nguyen Ha.

Continuing to divest in 137 SOEs

According to Decision 58/2016/QD-TTg on the criteria for classification of State-owned enterprises (SOEs), State-owned capital enterprises and the list of SOEs sorted in 2016 – 2020, attached divestment lists and guidelines, roadmaps of SOEs which has been issued by the Government, 240 SOEs will make arrangements for the period 2016-2020. In which, 103 State-owned enterprises will hold 100% of chartered capital, 4 enterprises will equitize and the State will hold more than 65% of chartered capital, 27 enterprises will equitize and the State will hold from 50% to 65% of chartered capital, at the same time, 106 enterprises will equitize and the State will hold less than 50% of chartered capital. According to the Government policy, the State will hold 100% of capital in 103 enterprises operating in 11 specific areas related to defense and security, industrial explosive material production and trading, maritime security, lottery business, public services, money printing and coining, gold bar producing, and souvenir items, publishing. In the lottery field, in addition to holding 100% stake in 62 lottery companies in 62 provinces, the State will also hold 100% stake in the Vietnam Lottery Company (Vietlott), the company is directly under the Ministry of Finance. In the list of banks continuing to be held 100% chartered capital by the State, with 2 banks related to the budget credit including the Vietnam Development Bank and the Vietnam Social Policy Bank, 3 banks which the State bought back with the price of 0 VND in the previous period were the Global Petroleum Bank (GPBank), the Vietnam Construction Bank (VNCB) and the Oceanic Bank (Ocean Bank). Some notable names in the list held 100% chartered capital by the State were PetroVietnam – holding company (PVN), Vietnam Electricity Corporation – holding company (EVN), and Vietnam Railways Corporation.

Under the list of the State enterprises which will hold more than 65% of chartered capital (4 enterprises), 3 enterprises in this list are also notable names including: the Vietnam National Coal and Mineral Industry Group (TKV), the Bank for Agriculture and rural Development (Agribank) and the Oil and Gas Exploration and Exploitation Corporation.

The expected list is the State-owned enterprises holding 50-65% of chartered capital as well as below 50% of chartered capital. In the 27 State-owned enterprises only holding 50-65% of the charter capital in 8 industries and sectors, there are some typical names such as: the Chemical Corporation, the Tobacco Corporation, the General Corporations of Electricity in the North, Central and South, Vinafood 1, Vinafood 2, VNPT, and Mobifone. Besides, the list of State-owned enterprises holding less than 50% of chartered capital has several notable names such as: the Shipbuilding Industrial Corporation, the Cement Industry Corporation, the Hanoi Trade Corporation, the Saigon Jewelry Company - SJC, the Vietnam Paper Corporation, Binh Son Petroleum Refining and Chemical Sole Member Limited Liability Company.

According to the experts, launching the equitized and divested enterprise list will create favorable conditions for domestic and foreign investors to collect accurate information, thereby they can determine the potential for favorable and effective investment. The divestment in SOEs will help the State collect a certain amount of capital to reinvest in other areas. Earlier, as reported by the Vietnam Development Partners Forum (VDPF), by the end of 2015, total State capital in 800 businesses was worth of about $US 55 billion and total assets of about $US 130 billion. Thus, the scope of the divestment for 2016 -2020 was the actual value in the $US tens of billions.

Need sanctions if divestment is slow

Acclaiming the decision promulgation of the Government, economist Luu Bich Ho stressed that the SOEs arrangement, equitization, divestment and reform must be implemented decisively in the coming period. According to the expert, in recent years, we have seen the problems of SOEs clearly, but we also hesitated, calculated interest in equitizating, and restructuring, so this progress was fairly slow. Most of the ministers, who are responsible for part of the State capital in these enterprises have not done enough yet for equitization, divestment and restructuring. Somewhere, there has been still much hesitation, calculation about benefits, including the State, the industry, and the enterprise itself.

The expert Luu Bich Ho noted, not only the SOEs of divestment and equitization list in 2016-2020, but also the SOEs in the roadmap set out in the previous period should be implemented drastically and radically. If we have not solved in the State sector which manages the majority of resources for the growth from capital, land, people to means, in 2017, we would be very hard to satisfy the international integration provisions under the new generation FTAs in 2018, such as public service liberalization, competitive liberalization and space expansion for financial and banking services, and public policy information.

In this regard, Mr. Nguyen Hoang Hai, the Vice Chairman of the Association of Financial Investors (VAFI) said that with Decision 58, investors might seek investment opportunities in SOEs, State-owned capital enterprises specifically, instead of lack of information as before. However, this expert also noted that the Government issued Decision 37/2014/QD-TTg on the criteria, the list of enterprise classification since 2014, in which, the enterprises which the State held dominant shares were few, it meant that the State was allowed to divest the majority in the enterprises both large and small, but the divestment result were still very slow, so Mr. Nguyen Hoang Hai said that the Government should have sanctions for slow divestment in State enterprises.

According to this expert, the fact of equitization and divestments showed that it was difficult to seek buyers for inefficient enterprises, but with large efficient enterprises, if the sale of shares was massive, through a public auction, not all investors would want to buy. “We need to pay attention to attract strategic domestic and foreign investors, have mechanisms to invite and create conditions to attract strategic investors to participate actively in divestments. In fact, this is hardly practicable, for example, 10 efficient enterprises that the SCIC is managing capital, the Government has had a plan to divest, but they only implemented a little bit in Vinamilk” Mr. Nguyen Hoang Hai shared.

According to the experts, the divestment of upcoming businesses should find the companies and strategic partnerships giving benefits for the long-term development of enterprises and brands. The purchase of shares in any SOE must also be public and transparent, avoid interest groups, along with the divestment commitment on time, so that, the State will collect the highest benefits as possible.