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Last updated: Wednesday, May 23, 2018


Delays in Transfer of State Capital Ownership to SCIC

Posted: Tuesday, March 07, 2017

Ministries and localities are reluctant to transfer the ownership of the state capital to the SCIC. In this regard, the Central Institute for Economic Management (CIEM) held a seminar on transferring the right to represent the ownership of State capital to the State Capital Investment Corporation (SCIC) on February 21.

74 per cent of companies fail to reach capital transfer agreement
According to the CIEM, from 2013 to now, 234 SOEs have agreed to transfer the capital to the SCIC but currently; however only 61 companies (26 per cent) have reached an agreement of the transfer while 173 companies (74 per cent) have not reached the consensus. According to the CIEM, the State capital of these 173 companies is about VND82,600 billion; of which there is VND46.9 billion from 32 enterprises managed by ministries and VND60.2 billion of others managed by localities.

Of the 32 companies under the ministries, there are 8 companies managed by the Ministry of Industry and Trade, 5 by the Ministry of Transport, 5 by the Ministry of Agriculture and Rural Development, 10 by the Ministry of Culture, Sports and Tourism and 4 by the Health Ministry. Of 141 enterprises managed by localities, there are 50 enterprises managed by Ho Chi Minh City, 15 by Gia Lai province, 13 by Thua Thien Hue province, 11 by Binh Dinh province and 7 by Dien Bien province.
Until now, the transfer process has been delayed, said Mr Phan Duc Hieu, Deputy Director of CIEM.

Many people are concerned that the SCIC will not perform well when representing the ownership of the State capital of the SOEs. However, according to the SCIC, the corporation has represented more than 1,000 businesses, with the total capital of VND9,900 billion (at market price of VND15,000 billion). The SCIC has sorted types of capital and applied the advanced management methods to improve the efficiency of the business production. In general, the companies that were transferred have started earning profits and met the all the criteria of maintenance and development of the capital. The average ROE is ranged from 15-17 per cent, particularly 18-20 per cent from 2011 to 2015. In 2015, 50 large companies (90 per cent of the portfolio value of the SCIC) have ROE of 20.5 per cent and earned dividends of VND25,700 billion and profits of more than VND19 trillion from the resale of the capital. In addition, the SCIC has researched and actively invested over US$1 billion of capital into some of the most potential projects, with good future profitability and increasing value of shares in companies, along with indirect investment.

According to the CIEM, to transfer the right to represent the ownership of the State capital, the SCIC is an important solution in the process of restructuring the State-owned enterprises to enhance effectiveness of managing asset and improving the business environment towards the equality and fairness among different types of businesses.
According to Mr Phan Duc Hieu, there are many reasons affecting the transfer process. Some local enterprises are delaying the process. Meanwhile, the legal sanctions for agencies, organisations and individuals who are reluctant to transfer the right of ownership are incomplete and unclear. This has not put pressure on the relevant parties as directed by the Prime Minister. Besides, it was supposed that the SCIC does not want to take over some businesses because they are not in favourable business conditions.

Mr Nguyen Hong Hien, Deputy General Director of SCIC, said that the Prime Minister and the Ministry of Finance has released many documents but the transfer process is still too slow. Although the Prime Minister issued Decree 10382/VPCP- DMDN on December 11, 2015, stating that groups and corporations are not allowed to sell out the capital before they are transferred to the SCIC, some corporations have still ignored that.

To handle the deadlock, Nguyen Dinh Cung, Director of CIEM, suggested that the authorities should be persistent with the progress of the transfer, including liability associated with in-charge individuals. The authorities should also learn about what types of functions the SCIC will adopt after the transfer process and how the State capital will be invested to achieve good outcome. He also said that the transfer process exposes the slow reforms. "The stories are not about the transfer progress but also the conflicts of the interests. These are things that need to be solved," said Mr Cung.

Nguyen Thanh

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