Why is equitization slow? Pressure of 60 trillion VND and expectation from Sabeco, Habeco

Production activities at Sabeco. Source: The Internet.

Pressure of 60 trillion VND

According to the resolution of the National Assembly, state budget revenue from equitization and divestment in 2017 must reach 60,000 billion VND. This is a small amount of pressure, because equitization revenues are negligible, mainly from divestments. Meanwhile, in the period 2011-2016, the country only regained more than 29,867 billion VND book value, collecting 43,376 billion VND. Thus, the average annual withdrawal of state capital is only collected more than 7.200 billion VND, far less than this year. In the first 7 months of 2017, the units only regained 3.693 trillion VND, earning 15.770 trillion VND (including divestments in 2016 of new units reported in the first 7 months of 2017).

From the results, it is not easy to reach the budget target of 60 trillion VND this year. Therefore, all eyes are focused on the results of divestment Vinamilk, Sabeco, Habeco. However, at the press conference, SCIC said that it only sells 3.33% of Vinamilk's chartered capital and is expected to earn 7,000 billion VND from the divestment. Meanwhile, plan to withdraw capital at Habeco and Sabeco has not yet been finalized, so if the sale of capital at these two "giants" has not been done this year, where will the revenue reach 60 trillion VND?

Besides, it is more worrying that the Government has not yet issued the list of divestments in the period 2017-2021 and the list of divestments in 2017 in particular, so there is no basis for assessing whether completing the refund into the budget revenue target. In addition, local ministries and branches did not hand over the capital to SCIC in order to divest. As reported by the Ministry of Planning and Investment and SCIC, from 2013 to date, about 234 enterprises have agreed to transfer capital to SCIC. However, only 61 enterprises have transferred capital. Localities still retain 141 enterprises, of which 50 are Ho Chi Minh City. In the first 6 months of 2017, 46 enterprises were transferred by state agencies, ministries and localities to state capital transfer to SCIC but not yet transferred. 176 enterprises have not agreed to transfer to SCIC. Meanwhile, much of the proceeds from the divestment now rely on SCIC with over 77%. In the first seven months of this year, SCIC sold 20 companies worth 1,394 billion VND, earning 12,238 billion VND (including Vinamilk's 2016 retained earnings).

Active in the passive

While the Ministry of Planning and Investment owes its portfolio of divestments during 2017-2021, on July 10th, 2017, the Government issued Decision 1001/QD-TTg approving the plan for reorganization, classification of SCIC's business to 2020. Accordingly, the Decision specifies: In the period of 2017 - 2020, SCIC will sell state capital at 132 enterprises; there are four SCIC companies that are actively selling their capital at the right time and are actively withdrawing capital from new entrants. Despite being given such initiative by the Government, but according to Mr. Nguyen Hong Hien, SCIC's deputy general director, this was the initiative in the passive position. SCIC's businesses are still unknown. Moreover, many businesses are unified by ministries and localities to hand over to SCIC then asked to keep it because it is important in the field of management. Therefore, the plan is active but the reality is passive. Therefore, concurrently with the Department of Corporate Finance, Mr. Hien said that the ministries, ministerial-level agencies and localities seriously implement the handover of enterprises must be handed over to SCIC in accordance with current regulations, to really create the SCIC's initiative in line with the direction of the Prime Minister.

This is necessary to do because the role of the SCIC pillar in the divestment of the past time is very clear. In terms of capital withdrawals at large enterprises such as Vinamink, SCIC completed the first sale of capital with high efficiency, when it collected 11,286.4 billion VND, although the book value was only 783.7 billion VND. As for the Government's second sale of capital, SCIC quickly submitted the plan and was approved by the Government. Meanwhile, the divestment of Sabeco, Habeco (Ministry of Industry and Trade) has not yet been finalized.

Regarding the capital withdrawal at enterprises in general, after receiving and restructuring, SCIC has improved the value of the state capital. For example, at Vinh Son Song Hinh Hydropower Joint Stock Company, the book value was over 494.9 billion VND but regressed to 796.9 billion VND. At Quang Nam Forest Products Export Production Joint Stock Company book value of 19.5 billion VND but retreat, collected more than 50.9 billion VND; Barotex Trading and Investment JSC's book value of 19.9 billion VND but regress, earning over 30.3 billion VND, etc.

On 30th September 2017 - Deadline for Sabeco, Habeco to be transferred to SCIC?

In order to accelerate divestment in the coming time, the Department of Enterprise Finance requests the Ministry of Finance to submit to the Government a number of solutions. In particular, the first solution is to propose the Prime Minister to assign the Ministry of Industry and Trade to accelerate the pace of selling the entire state capital at Habeco and Sabeco, ensuring completion to transfer money to the Business development and arrangement support Fund before 1st December 2017. In the case that by 30th September 2017, the Ministry of Industry and Trade has not yet completed the announcement of the state capital withdrawal announcement at Sabeco or Habeco, submitting to the Prime Minister to instruct the Ministry of Industry and Trade to hand over the representative ownership of Sabeco and Habeco to SCIC to secure the divestment. Accordingly, the transfer will ensure a faster pace of capital withdrawal as SCIC is a fully-fledged, experienced, large-scale state capital withdrawal process; to ensure administrative reform, increase responsibility, follow market principles, publicity and transparency. At the same time, the Ministry of Industry and Trade will help to complete the state management tasks assigned by the Government.

The Department of Corporate Finance said that it is necessary to publicize the plan to restructure the enterprise in the period of 2016-2020, the roadmap, plans to divest capital at the capital contributing enterprises and the plan to equitize the member enterprises on the Government Electronic Information Gate and sent to the Ministry of Finance, Steering Committee for Enterprise Innovation and Development for monitoring and speeding up. In addition, the ministers, the heads of the ministerial-level agencies, the agencies attached to the Government and the presidents of the People's Committees of the provinces and centrally-run cities should direct the elaboration of the list of reorganized state enterprises by year, the list of enterprises with State capital shall be withdrawn and submitted to the Prime Minister for consideration and approval according to specific time marks. Accordingly, before August 31st, 2017, the plan for the restructuring of corporations and state enterprises under its management and appraisal of restructuring plans of economic Groups shall be approved and SCIC will submit to the Prime Minister for consideration and approval.