The State, which is represented by the State Capital Investment Corporation (SCIC), is cutting stakes in many enterprises in accordance to a roadmap to apply the long-term State-owned enterprise restructuring policy. However, many are very concerned about the ways to attract strategic investors for enterprises after SCIC withdraws capital.
Mainly small concerns
Today, SCIC’s portfolios are grouped into three. The first group is the strategic investor group with 11 enterprises, which accounts for 43 per cent of the portfolio value. The second is the flexible investor group with 105 enterprises, which makes up for 29 per cent of the portfolio value. The third is the capital-withdrawn group with 716 enterprises, which takes up 28 per cent of the portfolio value.
Clearly, SCIC will withdraw capital in small and medium-sized enterprises, which do not have much market influence and popularity. Therefore, auctions to sell SCIC’s capital in these enterprises are usually unattractive to investors. In the fourth quarter of 2008, SCIC planned to take out capital in 144 enterprises with a total of VND340 billion. Most of them are very small ones and locate in remote areas. Among them, 106 enterprises have chartered capital of less than VND5 billion and only 10 enterprises have capital of VND10 billion or more. The total registered capital of these 144 enterprises is VND666.5 billion.
Ineffective method
In fact, the capital withdrawal of SCIC in 2008 was only the tentative step and was small in relation to the roadmap. The common method to sell State equity in enterprises is to organise auction. Due to many difficulties, this activity was not widely applied in 2008. Nonetheless, SCIC proposed the Ministry of Finance to apply a new negotiable method to withdraw the State capital. The ministry has reviewed the proposal and sent it the Government for instruction. Therefore, the withdrawal of State equity in State-owned enterprises will be stronger in 2009.
However, according to the Vietnam Association of Financial Investors (VAFI), the above difficulties in addition to the method SCIC has implemented made State-owned enterprises unattractive to investors. VAFI says the information disclosure from SCIC is also very weak. Investors do not know how much stake SCIC will sell to the public, a part or the whole. As a result, strategic and institutional investors will turn their back on stake selling. In addition, the information about offered enterprises is very brief. Mr Nguyen Hoang Hai, General Secretary of VAFI, said: “Why did SCIC release financial statements in several consecutive years and valuations reports at the time of privatisation for investors to understand more about the assets and operations of enterprises? The time and location for auctioning is usually not specific. Investors are unable to know what enterprises have State equity sold and what not.” Mr Hai added that, without doubt, SCIC could not sell capital in those 144 units in 2008. So, how is the plan for the capital withdrawal in 2009?
According to VAFI, such information disclosure is unprofessional, non-transparent and lax. This will create loopholes for “give and take” regime to develop. This is against the principle of SCIC “Strategic investors, dynamic investors and strategic consultants for SCIC projects.” If private enterprises sell their stakes to the public or to strategic investors, the information released will be much more than that from SCIC.
In the context of stock market slump, a large majority of investors do not care much about stakes offered by SCIC. However, strategic investors do not need offered enterprises to operate effectively. They will invest if they can access information easily and favourably. Hai said the presence of strategic investors in SCIC-sold enterprises will basically change corporate governance. Then, those enterprises will be managed and operated more effectively. Thus, SCIC needs to change the process of offering stakes to the public.
Portfolios of classified withdrawn enterprises
According to VAFI, to effectively withdraw capital from enterprises, SCIC should quickly solve the above shortcomings and attract strategic investors.
Mr Hai analysed that SCIC needs to classify and enlarge the list of capital withdrawn enterprises. Among 832 enterprises with State equity managed by SCIC, more than 700 do not need the State presence. SCIC cannot manage more than 50 enterprises with its controlling power.
“From the list of classified capital-withdrawn enterprises, SCIC needs to publish the information on the website to let investors know and prepare for the auction. At the same time, it should make public the roadmap to sell State stakes, corporate financial statements, valuation reports and other documents,” Hai pointed out.
On the other hand, strategic investors should be allowed to join negotiable selling contracts. According to Mr Hai, to effectively manage the enterprises, strategic investors always want to hold more than 30 per cent of stake. The negotiation transaction does not necessarily take place when the public offering is carried out.
In profit-taking enterprises, when SCIC withdraws capital, the corporation can sell the stake to strategic partners in form of treasury stocks. According to studies of VAFI, many good performing enterprises with SCIC equity and strong financial capacity, many strategic investors really want to buy 10 per cent - 30 per cent of State stake at the market price. The attraction is easier for listed firms. SCIC should not hold more than 20 per cent of stake in companies that the State does not need to hold controlling shares.
To attract strategic and instructional investors to join SCIC-led privatisation process, SCIC needs to organise many meetings to introduce its capital withdrawal roadmap, inform its contacts, update information and instruct its representatives at enterprises to meet investors.
Quynh Chi
Vietnamese
