Danang Hi-Tech Park
Dinh Vu

Economic Sector

Last updated: Tuesday, May 22, 2018


Hard to Transfer Capital to SCIC

Posted: Friday, March 17, 2017

The transfer of State enterprise ownership rights to the State Capital Investment Corporation (SCIC) from enterprises administered by ministries and provincial/municipal people’s committees is too sluggish, complicated and difficult. This was the main discussion content at the “Workshop on Transfer of Enterprises to SCIC: Reality, Difficulty and Recommended Solutions” held by in Hanoi by Central Institute for Economic Management (CIEM).

Too late
Dr Nguyen Dinh Cung, Chairman of CIEM, said, in Official Dispatch No. 2225/TTg-DMDN dated December 12, 2016 on transfer of State capital ownership to SCIC, the Prime Minister instructed the Ministry of Planning and Investment to work with relevant ministries, ministerial-level agencies, governmental subordinates and provincial/municipal people’s committees to propose solutions to enterprises subjected to be transferred to SCIC amid disagreement among ministries, ministerial-level agencies and provincial/municipal people’s committees and report to the Prime Minister for consideration and decision.

However, up to now, 173 State-owned enterprises (SOEs) are subjected to be transferred to SCIC but SCIC, ministerial-level agencies and provincial/municipal people’s committees failed to reach consensus. Those include 32 enterprises under ministries, 15 enterprises under northern localities, 59 enterprises under central localities and 67 enterprises in southern localities with a combined registered capital of VND82 trillion. One-member limited liability companies account for 74 per cent of capital and 68 per cent of enterprises and the rest is joint stock companies, said Cung.

Mr Phan Duc Hieu, Vice Chairman of CIEM, said, among 32 enterprises administered by ministries and central agencies, the Ministry of Culture, Sports and Tourism takes the lead with 10, followed by the Ministry of Industry and Trade with eight, the Ministry of Transport with five, the Ministry of Agriculture and Rural Development with five, and the Ministry of Health with four. He said many ministries, agencies and localities have not actively carried out or even delayed the capital transfer process. They tend to retain such firms or divest capital instead while handing poor-performing companies to SCIC. Meanwhile, SCIC does not want to take over struggling businesses. Many localities insist on not transferring healthy businesses to SCIC since they help local development.

Nguyen Hong Hien, Deputy General Director of SCIC, said, by December 2016, SCIC had received the rights to represent State ownership at more than 1,000 companies whose total market capitalisation is VND9.9 trillion (over VND15 trillion in market value), a mere 1 per cent of total State capital at enterprises nationwide, of which more than 80 per cent operate inefficiently.

Although this is a major policy of the Government and the lead agency - the Ministry of Finance - also has close and urgent directions, the transfer of enterprises to SCIC is very slow. The care of many local leaders is not enough, leading to delays or limited transfers, Mr Hien said.

Reasons and solutions
A representative from the People's Committee of Dien Bien province said the province has 19 enterprises subjected to be reshuffled, including four to be transferred to SCIC. In reality, it is easy to deal with good performers but it takes time to handle loss-making enterprises because of no close cooperation in tackling emerging issues relating to land and bad debts.

Mr Duong Dang Hue, former Director of the Civil and Economic Legislation Department under the Ministry of Justice, said that, in the civic field, divorce is thought to be very simple but it is extremely difficult to solve when property and psychological factors have not got done. Meanwhile, the transfer of enterprises to SCIC promises huge benefits. As a result, delays are understandable. He attributed this slowness to conflicts of interests, insufficient determination of competent authorities and responsible persons, and weak commitments to implementation. He suggested that the Government should meet with ministries and localities to listen to their reasons to have best solutions. Then, the Government must issue resolutions, not simply written notices as the past. Ministers and local leaders must vow to the Prime Minister on transfer.

Mr Do Thai Hung, Deputy Director of the Enterprise Management Department under the Ministry of Transport, said that “I used to work for companies and I clearly understand what other workers want. Indeed, some companies do not want to move out of the administration of the ministry because they are operating well. The reason for the leaving is unpersuasive to them. In my opinion, we should take specific cases into consideration to have the most appropriate solution rather than rigid ones.”

An official from the Enterprise Reform Department under the Ministry of Industry and Trade said that there are reasons for many companies under the ministry not to be transferred to SCIC. For example, the Vietnam Steel Corporation, which went public in 2008, has not been able to settle payments because many of its member units have huge land and get fraught with financial management. Thai Nguyen Iron and Steel Project suffered huge losses in the second phase of investment. The corporation has some 50 member companies and the ministry has sent a report to the Prime Minister on this case but it has yet to receive the feedback with guidance.

Giving analysis to this thorny issue, Dr Nguyen Dinh Cung said that, as long as the so-called give-and-take mechanism still exists, many companies will not want to transfer capital to SCIC because enterprises themselves, ministries and localities all have benefits. Nevertheless, it is not good for the economy as a whole.
According to Dr Nguyen Tien Cuong, the transfer of State capital to SCIC for management will be more effective than old mechanisms. But, it is essential to look into specific cases to know reasons for delay or reluctance to make the move to SCIC to have solutions.

Anh Phuong

Other news

Trien lam ICT
Sunny World Property Development Corporation
Thanh Binh Phu My
Golf Long Thanh
Nam Kim
Cty Sai Gon- Tay Bac