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Last updated: Monday, November 19, 2018


SOE Equitisation: Far behind the Target

Posted: Thursday, November 16, 2017

The equitisation of Vietnamese State-owned enterprises (SOEs) is slow-moving, low-quality and clogged despite many efforts, said experts at the “Report Launching Workshop on Strategic Investors in Equitisation of SOEs” held by the Central Institute for Economic Management (CIEM) in Hanoi.

Hard to lure strategic investors
According to Mr Adam Sitkoff, Executive Director the American Chamber of Commerce (AmCham) in Hanoi, many foreign investors wanted to buy shares in Vietnam’s SOEs but abandoned their intention after they conducted studies. He attributed this to poor information publicity and transparency. Besides, business valuation is not consistent with international practices, making it difficult for investors to judge whether the shares they intend to buy are fair and well-grounded.
Addressing the deterred SOE equitisation, Pham Duc Trung from the Enterprise Reform and Development Committee (CIEM), said that the National Assembly set the target of taking back VND60 trillion from SOE equitisation and SOEs’ divestments in 2017, but just VND12 trillion was fetched in the first nine months, including VND6 trillion from equitisation.

He said, the lack of information in equitised SOEs is true. According to the Ministry of Planning and Investment, only 39 per cent of SOEs disclosed information in line with the regulations of the Government. Information disclosure at equitised SOEs fails to meet investors' expectations.

Dr Nguyen Dinh Cung, CIEM President, pointed out another reason for the disinterest of strategic investors: The Government of Vietnam still has restrictions on share ownership of foreign investors in some industries and fields. Foreign investors are not allowed to invest in 54 industries and fields and they cannot hold more than 49 per cent of stake in 113 industries and fields.

At present, most profits earned by SOEs are from SOEs that the State holds 100 per cent of stake. Big firms like Viettel and PetroVietnam made up for more than 70 per cent of SOEs’ profits last year, while the rest, including SCIC, EVN, VEAM and ACV, contributed less than 30 per cent. This showed that the profitability of most SOEs is relatively low.

SOEs also have high financial risks, especially debt burdens before and after privatisation. These reduce appetites of strategic investors.

Changing the approach
Stagnated SOE equitisation has caused the value of the Vietnamese economy to go down. Pham Duc Trung suggested that the Government should now have clear and transparent regulations on criteria of selecting strategic investors to get rid of short-term investors or those who do not bring real values to the enterprise. It should also consider opening more industries and fields for foreign strategic investors to hold controlling shares, especially in industries and fields that do not directly affect national security and sovereignty.

Mr Ho Sy Hung, General Director of the Enterprise Development Department under the Ministry of Planning and Investment, agreed on the opinion that equitisation and divestment must be accelerated. However, divestiture poses many risks to stakeholders and causes pressures to business owners and strategic shareholders as well. New approaches to equitisation and strategic investors need to be redefined to restrict State holdings and further open up to enable enterprises to control business affairs.

According to Dr Nguyen Dinh Cung, equitisation was not successful after 25 years of carrying out equitisation policy because there are so many things to be done and many plans to be fulfilled. It is necessary to improve the legal system and approach investors.

Anh Phuong

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