Revenues from equitization, divestment – Why it is difficult?

In 2022, the target of revenue collection from equitization and divestment is VND 20,000 billion. Source: Internet

Target to collect VND20 trillion from equitization and divestment

According to the plan, the revenue from equitization and divestment of state capital at central enterprises to be paid to the state budget in 2021 is VND40,000 billion. However, the development of the Covid-19 pandemic has caused a negative impact, impacting the revenues from equitization and divestment of state capital at enterprises in 2021. The data updated to the end of the third quarter of 2021 showed that the revenue from equitization and divestment had only reached VND366 billion.

The reason why revenue collected from equitization and divestment in 2021 faced difficulties is that many units subject to equitization have not yet completed the legal procedures for realignment, house handling, land before equitization following the regulations on rearrangement and handling of public property; many problems and shortcomings on finance needed to be solved.

At the same time, the Covid-19 pandemic also had a great impact on the situation of the domestic and regional financial and securities markets; many localities were locked down, prolonged social distancing, making the implementation of equitization and divestment impossible.

To further clarify the causes of equitization, slow divestment, and unsatisfactory revenue, Mr. Dang Quyet Tien, Director of the Corporate Finance Department (Ministry of Finance), said that there was still an ideology that did not want to be equitized. Besides that, when carrying out equitization, the stage of preparation, arrangement and handling of land is not drastic.

According to Mr. Dang Quyet Tien, although mechanisms and policies are adequate, the issue of land handling is not clear and transparent, so it is not possible to value the enterprises. Regarding divestment, to ensure efficiency, one must not sell through the stock market by the method of small order matching, but to sell the whole lot, it must be auctioned directly. However, due to the impact of the Covid-19 pandemic, a direct auction cannot be held, which affects revenue.

For the 2022 plan, according to data from the Department of Corporate Finance, this unit is expected to balance VND10,000 billion which will be allocated to the local budget from revenue from equitization and divestment in the previous period that has not yet been paid to the state budget or retained in the locality and VND20,000 billion will be allocated to the central budget from the state capital divestment of six enterprises on the list of divestments in Notice No. 281/TB-VPCP dated September 7, 2016 of the Government Office.

Should be well prepared

For the balance of VND 20,000 billion for the central budget, it is forecast that the revenue from the divestment of state capital at five enterprises including FPT Corporation; Bao Minh Joint Stock Corporation; Tien Phong Plastic Joint Stock Company; Vietnam Infrastructure and Real Estate Joint Stock Company; Bao Viet Group is VND1,858 billion and the difference in revenue from the divestment of state capital is estimated at VND8,400 billion. Along with that, divesting capital at Hanoi Beer - Alcohol - Beverage Corporation (Habeco) with the value of state capital at par value is VND1,895.9 billion, the expected value is VND12,152 billion. If the above plan is successfully implemented and all revenues are remitted to the state budget (including the state capital and the difference in capital divestment), the provision of about VND20,000 billion for the central budget will be fully feasible.

Previously, in order to achieve a minimum revenue of VND30,000 - VND40,000 billion, besides divesting state capital in five enterprises mentioned above, the Corporate Finance Department also considered the divestment of state capital in Sabeco with a value of State capital is expected to be VND32,320 billion (with market price of VND140,000/share). However, to ensure prudence and feasibility, the Department of Corporate Finance forecast that the revenue from equitization and divestment of central enterprises in 2022 is likely to reach about VND15,000 - 20,000 billion.

Because the equitization takes a long time, the revenue from the equitization and divestment of central enterprises in 2022 would depend on the divestment in enterprises established by the State Capital Investment and Trading Corporation (SCIC). In that context, the Ministry of Finance recently issued a document requesting SCIC to focus on divesting capital of three enterprises, namely Bao Viet Group, Bao Minh Joint Stock Corporation; Tien Phong Plastic Joint Stock Company.

The proceeds from the divestment of the three enterprises mentioned above must be paid to the Enterprise Arrangement and Development Support Fund in December 2021 to pay to the State budget. Regarding SCIC's divestment, earlier this year, this unit announced a list of divestments in 2021 at 88 enterprises, including many big names such as Sabeco, Song Da Corporation, Textile and Garment Group.

According to Mr. Dang Quyet Tien, to ensure revenue in 2022, the unit has advised the Ministry of Finance that the divestment must have a specific address. Accordingly, the list of enterprises carrying out divestment is very specific, the mechanism is clear, so it is recommended the Prime Minister direct the Board of Management of State Capital at Enterprises, large localities such as Hanoi and Ho Chi Minh City to drastically urge the preparations. So that the steps of divestment must be carried out from January 2022. When preparing early, it is still possible to withdraw capital. On the contrary, if it is delayed, it will lose the opportunity.

According to Mr. Tien, if actively implemented, after a quarter, it will be able to complete the divestment documents to approve the divestment plan. After the divestment plan is approved, there is still room for 1-2 quarters to divest. Therefore, we must actively urge the implementation from now on, if we hesitate, it will be difficult to succeed.