Good growth after equitisation

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Impressive growth

According to the results of production and business of equitized SOEs, especially SOEs which have been listed on the stock market, many SOEs have achieved impressive growth in production and business, increased their contribution to the state budget and gradually increased income for employees. A series of large companies are mentioned as typical SOEs which have actually developed thanks to equitisation such as Vietnam Dairy Products Joint Stock Company (Vinamilk), Tien Phong Plastic JSC, Sai Gon beer, alcohol and beverage corporation (Sabeco), Hanoi beer, alcohol and beverage corporation, Vietnam National Seed JSC (Vinaseed), Vietnam National Petroleum Group (Petrolimex), Dien Quang Lamp JSC, Binh Minh Plastics JSC (Binh Minh Plastics) and Vinacafe Bien Hoa JSC.

Vinamilk is the most mentioned name during the past time. Established in 1976, at the end of 2003, Vinamilk started equitisation. The charter capital of the company at that time was VND 1,590 billion. In 2006, Vinamilk's shares were officially listed on the stock market, marking a big turning point for the company. Since then, the shares of this company have always been hot for investors, especially foreign investors. So far, after 14 years, the company's chartered capital is more than VND 14,514 billion, higher by nearly 10 times than the starting time of equitisation. During the past 10 years, Vinamilk's revenue has grown around 22%, from less than VND4,250 billion in 2004, to VND46,965 billion in 2016. This is also the largest company by market capitalization in Vietnam today, about US $ 6 billion. In terms of trade, Vinamilk is not only a leading company but also has exported to more than 30 countries with annual export turnover of hundreds of millions of US dollars.

Petrolimex is also a group which has many achievements after equitisation. Formed by the equitisation and restructuring of the Vietnam National Petroleum Corporation in 2011, Petrolimex faced many difficulties in its production and business activities when it suffered a loss of about VND1,600 billion. Being a major state-owned enterprise with a special rank and nationwide scope and ensuring 60% of the country's petrol market, equitisation was considered a big turning point for Petrolimex. According to Bui Ngoc Bao, Chairman of Petrolimex, equitisation was an important milestone marking a new development stage of Petrolimex. Accordingly, after 5 years of equitisation, in 2016, Petrolimex reached a record in both revenue and profit when total consolidated revenue of Petrolimex collected VND 123,097 billion, consolidated profit after tax was VND 5.165 billion and budget remittance was VND 33,304 billion. Also in 2016, the charter capital of the Group hit nearly VND 13,000 billion. According to the updated figures, in 2017, Petrolimex's revenue was estimated at VND 152,900 billion, up 7% year on year and pre-tax profit was VND 4,736 billion.

"Transferring to a new model, Petrolimex continues to play a key role in the state economy in developing Vietnam's petroleum market, contributing to macroeconomic stability, ensuring social security and sustainable growth." said Bui Ngoc Bao.

Enterprises have more motivation for production and business development after equitisation

Motivation from information transparency

It can be said that equitisation is the key for growth for many SOEs. Nguyen Hoang Hai, Vice Chairman of the Vietnam Association of Financial Investors (VAFI) shared that if there was a good management board, after equitisation and listing on the stock exchange, SOEs would develop very fast. Only about 10-15 years, the equity of enterprises could increase dozens of times and so do profits. In addition to large enterprises such as Vinamilk, Binh Minh Plastics ..., some SOEs also grew strongly after equitisation such as Refrigeration Mechanical Company and Coteccons Company.

"Before equitisation, these enterprises were tied, "after equitisation, the right to self-determination is expanded, especially enterprises with small state capital seemed to be untied.” Nguyen Hoang Hai emphasized. As in the case of Coteccons company, Mr. Nguyen Hoang Hai said before equitisation, this company was just a small construction company, was a "grandchild" of a corporation, so the equitisation of this enterprise was equitisation of a branch of the corporation, but now Coteccons has become a leading company in the field of construction. The reason for such fast growth is that the company had good human resources in their management system, and the state capital in the company accounted for a small percentage, then the state also divested its capital. Therefore, the company has good conditions and has been untied so it grew very fast. In addition, it was also supported by financial investors, this created favourable conditions for its development

The development history of Coteccons showed, in 2004, the company officially operated in the equitisation model. The initial charter capital was VND 15.2 billion. This company increased its chartered capital to VND 307.5 billion in June 2010. Then, 2016 was the milestone in its economic growth with a revenue of VND 20,783 billion, up by 52%, and a profit of VND 1,422 billion, up by 113% over 2015. Also in this year, Coteccons successfully issued its shares to strategic shareholders and earned VND 1,762 billion, raising its chartered capital to VND 770.5 billion, 50 times higher than the initial charter capital.

In the plastics industry, Binh Minh Plastic is a typical example of SOEs after equitisation. At the end of 2003, the company changed into a joint stock company. Three years later, the company was listed on the stock market and shortly thereafter increased its charter capital from VND 107 billion to VND 139 billion. In 2007, Binh Minh Northern Plastic Co.,Ltd of which 100% capital was invested by the company, put into operation. This marked the Binh Minh Plastics brand in the northern plastics market and by 2008 the consumption reached 30,000 tons, twice as much as before equitisation. One year later, in 2009, the revenue reached VND 1,000 billion, four times more than before equitisation. In 2013, its revenue exceeded VND 2,000 billion, up 100% within 4 years, and its chartered capital increased to VND 454.784 billion.

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A turning point in equitisation, according to Nguyen Hoang Hai, is that many SOEs after equitisation have been listed on the stock market, the information is transparent, so the motivation for equitisation is very strong. Nguyen Hoang Hai said that equitized companies must be encouraged to be listed on the stock exchange soon. This not only benefits the State a lot, but also brings the opportunity to change management, production and business. In addition, the demand for mergers and trade is so great. Therefore, the State should speed up the sale of state shares in SOEs in order to promote the SOEs after equitisation to develop faster and stronger.