Part 1: Consequences from the delays equitisation and divestment of SOEs

Restricted awareness and responsibility of the head of enterprises and units is one cause for the delay. Photo:ST

The number of enterprises which must be equitised is great

According to Official Letter No. 991 / TTg-DMDN dated July, of the Prime Minister, 18 enterprises must be equitised in 2019. By the end of the second quarter of 2019, six enterprises were approved for their equitisation plans but only one of them was on the list of equitised enterprises according to Official Letter No. 991. Statistics from 2016 to the end of the second quarter of 2019, showed that there were 35 of 127 equitised enterprises subject to the list of equitised enterprises according to Official Letter No. 991. This result clearly shows that the equitisation progress of enterprises has not reached the set plan when the number of enterprises which must be equitised is 92 of 127 enterprises, accounting for 72 per cent of the plan.

Overall, in the first three years of equitisation, the country equitised 162 enterprises (including 35 enterprises under Official Letter 991), with a total state capital reaching VND205,433.2 billion, equal to 108 per cent of the total value of state capital in equitised enterprises in the 2011-2015 period (VND189,509 billion).

Regarding divestment, according to Decision No. 1232 / QD-TTg, dated August 17, 2017 of the Prime Minister, 62 enterprises must be divested in 2019. But in the first half of 2019, only 10 enterprises in the above list divested VND1,011,384 billion and earned VND2,007,768 billion. In particular, the Ministry of Construction divested Viglacera Corporation with a book value of VND690 billion and earned VND1,587 billion. In total, from 2016 to the end of the second quarter of 2019, 88 units under Decision 1232 divested state capital with a value of VND4,801,432 billion and earned VND9.115,042 billion.

In addition to enterprises named in Decision No. 1232, over the past two years, other enterprises in the country divested VND3,785 billion and earned VND110,392 billion (including the divestment of VND3,436 billion and revenue of VND109,965 billion at Sabeco). Groups, corporations and SOEs under the restructuring scheme also divested capital with a total value of VND1,333 billion and earned VND2,174 billion. In particular, Viettel divested VND1,290 billion at Vietnam Construction and Import-Export Joint Stock Corporation (Vinaconex) and earned VND2,002 billion; SCIC divested five companies with a book value of VND36 billion and earned VND166 billion. In the first six months of 2019 alone, the divested capital amounted to VND2,092 billion, the revenue was VND3,831 billion.

Implementation is not serious

Regarding the reason for the slow equitisation and divestment, Corporate Finance Department under the Ministry of Finance Dang Quyet Tien said some ministries, sectors, localities and economic groups, state-owned corporations have not yet seriously implemented the plan on equitisation, divestment and restructuring of SOEs according to the Prime Minister’s direction and the reporting regime. In addition, the role, awareness and responsibilities of the head of enterprises and units are not high and drastic in renewing enterprises' operations, publicity, transparency, and compliance with law, ensuring the market rules, combat group interests in equitisation and divestment of state capital.

Tien said that there are also objective reasons. The SOEs equitisation requires a lot of time to deal with financial, land and labour problems before equitisation, prolonging the progress of equitisation. Especially, the land profiling by the local People's Committee is slow and takes longer than the regulation, leading enterprises to adjust equitisation progress. This was also reported by Ho Chi Minh City. The re-determination of value for equitisation of enterprises are not accurate.

The implementation of the Restructuring Plan approved in some enterprises has not focused on main production and business fields, in some cases, the revenue from investing outside enterprises accounts for a large proportion and the enterprises’ profits mainly come from financial revenues. In addition, in some enterprises, the handling of loss-making investments, arrangement for dissolution and bankruptcy of ineffective enterprises takes a lot of time; the settlement of SOEs is still slow; registration of transactions and listing on the stock market is still difficult, so the openness and transparency are limited.

In addition, another difficulty raised by the Ministry of Finance is that the state capital ratio in the SOE equitisation plan is still high, leading to reducing attractiveness for investors to buy shares, affecting success of equitisation. The delayed settlement and transfer into joint-stock companies of equitised enterprises which have changed their operation in the form of joint-stock companies, has affected the handover and collection and remittance to the fund for support of the arrangement and development of enterprises

In particular, many enterprises delayed in registering transactions and listing on the stock market, affecting the openness and transparency of the market and delays in renewing the corporate governance after equitisation in accordance with the practices and standards of enterprises in the stock market, restricting the supervision of society for the activities of these enterprises.

The Ministry of Construction's statistics shows that the difficulty of successful divestment is dependent on conditions, capital absorption capacity of the stock market and the attractiveness of the divested enterprise. Some enterprises of the ministry have inefficient production and business activities, when they are valued as prescribed by law, they are not sold because on investors want to buy them or investors do not buy all their shares

Assoc. Dr. Ngo Tri Long, an economic expert, said that, in many cases, slow equitisation and divestment also means the risk of losses for the State.

“We have heard that the slower the equitisation and divestment is, the more losses the capital. Leaders of the Government, ministries and sectors have spoekn about projects such as Phuong Nam Pulp Mill, Thai Nguyen Iron and Steel Company, etc. They have been offered many times but have not sold due to unsolved problems and existences,” said Long. In such cases, if problems are not solved to make divestments, disadvantages and losses will certainly increase

Another concern pointed out by Long is that the delay in equitisation and divestment easily leads to the psychology of moderation, even the worry of the management team and employees, directly hampering the production and business efficiency of enterprises.

These concerns impose an urgent need to speed up the equitisation and divestment in the future.