Final article: Why is equitization slow?

	Why is equitization slow? Pressure of 60 trillion VND and expectation from Sabeco, Habeco
	Why does equitization remain slow? Vietnam Rubber Group faces difficulty due to its large land fund
	Why is equitization slow? - "Hugging" many "large Corporations", Ministry of Industry and Trade suffers from debts

Regarding this issue, Customs Newspaper has a series of articles (12 articles published from publication No. 83 on July 13, 2017) to study and answer the question: why is equitization slow? The process of studying information in ministries, sectors, state groups, corporations, and SOEs shows that there are many reasons for slow equitization such as subjects of equitization and divestment in this period are mainly large scale enterprises with wide scope of operation, diversified business lines, complex finance, requiring many big investors, with good financial potential and good management and investment capacity. That takes a lot of time to prepare, handle and audit before publishing the value of enterprises. The Even subjective reason is that some SOE leaders have been still hesitant and afraid of responsibility in the implementation of equitization and divestment.

Although not mentioning all, articles also partly reflected actual situation and reasons for slow equitization. The Customs Newspaper temporarily closes this issue by the opinions of economists and managers in the hope of adding a viewpoint as well as coming up with solutions to implement the equitization, divestment, and restructuring of SOEs as planned.

Mr. Dang Quyet Tien - Deputy Director in charge of Corporate Finance Department, Ministry of Finance: It is required to immediately transfer capital to SCIC

In order to accelerate the SOE restructuring in the coming time, many solutions need to be synchronously implemented, in which proposing the Government to soon issue a Decree replacing Decree No. 59/2011 / ND- CP on transformation of enterprises with 100% state capital into joint stock companies; and a Decree amending and supplementing Decree 91/2015 / ND-CP on state capital investment in enterprises, management and use of state capital and assets in enterprises. The promulgation of these documents will remove most of the problems in the process of equitization and capital divestment in the past time and help to stop the situation that some units pleaded obstacles in the mechanism to not implement.

In addition, local ministries and sectors should strictly implement SOE restructuring decisions approved by the owners. After the Government’s decision on the list of enterprises engaging in capital divestment, , the roadmap and plans for divestments at enterprises with contributed capital and the equitization plan of member enterprises on the Government Portal must be publicized and sent to the Ministry of Finance and the Steering Committee for Enterprise Innovation and Development for monitoring and encouraging.

Management agencies also need to guide divested and equitized enterprises to pay fully and timely revenues to the Enterprise Development and Arrangement Support Fund because some localities still ask for retaining the revenues from equitization and divestment for development investment. At the same time, the Ministry of Finance needs to propose the Government to assign it to host and cooperate with Steering Committee for enterprise renovation and development, Ministry of Planning and Investment to monitor and urge ministries, sectors, and localities to implement the transfer of representative right for owners of state capital from ministries, sectors and localities to the SCIC in accordance with Decree 151/2013/ND-CP, even Sabeco and Habeco, if they delay the implementation. This will help ministries to focus on the state management task and SCIC actively speed up the divestment. Especially, it is required to unify one unit in charge of capital divestment for better implementation.

Mr. Luu Bich Ho, former Director of Development Strategies Institute (Ministry of Planning and Investment): The economy is still difficult, so it affects the capital divestment

More than a year from the beginning of the new term of the Government, despite the urge, the implementation of capital divestment and equitization in 2016 is very bad. In 2017, although the Government has strongly urged and introduced specific plans, until now, the progress has been slow.

The main reason was that the economy is in a difficult period, thus affecting the capital divestment and equitization of enterprises. This is not easy, who are buyers and buyers must see the business direction in a short term, medium term and development potential.

Besides, the enterprises that are easy to sell capital have completed the divestment; the remaining enterprises are difficult to sell capital, so the capital divestment and equitization become more difficult. Along with that, the ministries in charge and businesses are not determined enough to carry out the task of capital divestment and equitization. Therefore, although the Government has urged, the ministries and sectors have still implemented slowly and ineffectively.

At the conference of the Government consultants, some consultants also stated that the reform required not only traction force of Prime Minister but also the social propulsive force, especially SOE reform. The propulsive force is that a better business investment environment will promote the reform, but this is still a problem. I think that it is necessary to have an organization in charge, meaning establishing a super committee in charge of urging and accelerating the progress. The reform will be very difficult if it is still implemented in scatter manner in ministries.

Economist Nguyen Minh Phong: Equitization of agricultural enterprises is slow due to objective reasons

Over the past time, the equitization of SOEs in general and the agricultural sector, in particular, has been slow, one of the reasons given is the difficulty in valuing enterprises. In my opinion, for agricultural enterprises, this difficulty is right and objective. Because agricultural enterprises are often associated with land. So far, Vietnam has not had a good land valuation center. In fact, there are several land price evaluation centers, but they are mostly administrative and only available for small projects, and valuation of large land areas such as rubber forest and large sample fields or forestry farms is not really available.

However, in addition to above difficulties, the lack of experience and determination of enterprises and relevant ministries also causes the slow equitization. For example, for agricultural enterprises, many land lots under their management have been sold or leased, this issue is disclosed upon the equitization.

In order for equitization to be effective, the most important thing is that the relevant agencies have to explain clearly issues related to lands such as management agencies, area, and legal status. Relevant agencies such as the Ministry of Agriculture and Rural Development, the Ministry of Natural Resources and Environment and the Ministry of Finance also cooperate together to introduce a unified framework to value enterprises that own a lot of land for the Government’s approval and facilitation to the equitization process.

For SOE equitization in 2017-2020 period, the Government requested localities and groups to make a list of enterprises subject to equitization to be the base for implementation in accordance with the schedule. Units which fail to implementation will take responsibility and be sanctioned. Especially, the process of SOE equitization must be publicized widely and closely monitored by the society.

Economist, Dr.Nguyen Dai Lai: the situation that State staff still stays at equitized enterprises must be finished.

There are big challenges for the process of further equitization of SOEs. Firstly, the debt cleaning and clarification of the relationship between economic responsibility and SOE restructuring plan before listing are very difficult. Secondly, the determination of the net value of enterprises until equitization time is very complicated because it is related to the value of position, trademark, land use right and labor force of the laborer generations, which are included into enterprise’s value. Besides, how is state money used after equitization, does it avoid the current status that state money is still in equitized enterprises, the CEOs are unchanged, the operation still remains and technology is still underdeveloped. This is due to that state owners still prefer to keep those shares rather than use them to make a profit? Another challenge is that if enterprises are not equitized up or State still holds a part of shares in enterprises after equitization, what is the policy for representative for state capital in those enterprises?

From the above actual shortcomings and challenges of further equitization for SOEs mentioned above, I give recommendations and basic solutions. Firstly, in terms of strategic thinking, the State has to resolutely affirm that the equitization of SOEs means that the State sells SOEs to shareholders to collect money and pay them to people who contributed to the total value of SOEs until the date of selling. In which, the amount of the State will pay to the state budget to be a stimulation to non-state economic sectors for development in accordance with the perfect market mechanism and in line with the strategy of national economic restructuring; and pay for training and development of talents. The equitization ended, state officers are still at enterprises to monitor state money. The situation that State staff still stays at equitized enterprises to monitor the State money must be finished.

Secondly, regarding the view of the action, it must confirm that SOE equitization is the gradual transformation of State of business into State of management, equality, facilitation for creative, sustainable, unified, transparent, civilized, and modern economic development activities in accordance with the actual situation.

Why is equitization slow? The essence is the efficiency of corporate governance VCN- Not the ratio of capital sold, but the efficiency of corporate governance in general and the management ...

Thirdly, in terms of equitization method of remaining SOEs as well as the process of state capital divestment in enterprises after equitization, I think that it is necessary to restructure, clean and clarify the net value of SOEs in the forms and place holding state assets and clarify repayment and recovery methods before announcing the total number of shares to be issued on the stock exchange. If the shares are not sold out, the remaining shares will be the state contributed capital in enterprises after equitization. These shares must be transformed into preferential shares for the state to enjoy fixed dividends without a representative in the equitized enterprises. Agencies in charge of state capital will keep track of all remaining state capital in all equitized enterprises. As soon as these enterprises perform well, the State will gradually and quickly divest the capital to pay for the state budget. For SOEs that have basically gone bankrupt and have not sold the shares, they will be permitted to be liquidated for bankruptcy under the Bankruptcy Law.