Equitised Enterprises: Specialised for a Competitive Edge

Equitised Enterprises: Specialised for a Competitive Edge

The equitisation of State-owned enterprises (SOEs) is an important policy of the Vietnamese government to reform the management and increase the comparative edge of the enterprises in the context of international economic integration. Hurdles to the equitisation process mainly revolve around the evaluation of assets and the transformation of the legal status and business environment. However, after overcoming the hurdles, 500 equitised enterprises are reportedly increasing their turnover, profit and dividends of the workers.

VIB Forum reporter interviewed Mr. Tran Duc Phu, Chairman and Executive Director of the Post and Telecommunication Construction Joint Stock Company (CPT) on the difficulties, advantages and business orientation of the company after equitisation.

It is reported that CPT underwent a short-cut in its equitisation, establishing by itself a joint stock company instead of following the usual long process of equitisation. Have there been any changes in your business strategy?

The equitisation process designed by the government often takes a long time. Some SOEs could not complete the process in five years and business activities could not continue while waiting for the transformation. My company has followed the rules and contents of the guidance on equitisation. Managers and workers are the same people and shares are bought by them. In essence, it is exactly like any other equitised SOE, but with a little short-cut.

Before equitisation, my company covered a wide-range of activities from construction, interior decoration, tree planting and housing development to telecommunication projects. After equitisation, we noticed that specialisation would create a competitive edge and, so, CPT decided to shift from diversified activities to specific ones, concentrating only in the construction of telecommunication projects.

How is the business efficiency of the company? Have there been any difficulties following equitisation?

Business efficiency has clearly improved after equitisation in 1998 and the turnover increased from VND6 billion to VND150 billion. We do not yet sell shares as the rotation of capital is very fast. The efficiency is partly due to the dynamism of managers. The difference between SOEs and equitised enterprises is that in equitised enterprises the managers have more decision-making power with clear-cut responsibility and are under closer control. The managers will be dismissed for poor performance, and not just transferred to another post like in SOEs. They, therefore, have more sense of responsibility in their posts.

As the joint stock company was established by ourselves, we were exempt from the preferential treatment, such as a 50 per cent reduction in tax on profit two years, exemption of the registration fee for the transformation of the management of assets and other privileges in bank loans. We have the same difficulties as other equitised enterprises. Joint stock companies are having troubles growing, though it is not the fault of managers or activities. It is because equitisation is still new in Vietnam. The new form of enterprise is still confused with the typical model of SOEs in Vietnam. The definition of a joint stock company remains as a concentration of capital that does not yet depend on the stock market, while the operation of joint stock companies is in fact dependant on the stock market. In Vietnam, the stock market is not yet a foundation fostering joint stock companies and is still a new playground for Vietnamese businesses.

What is the business plan of CPT when foreign invested enterprises become more involved in the Vietnamese P & T sector?

When foreign investors participate in the Vietnamese telecommunication sector, it also means that they will bring in new technology. CPT is fully engaged in key services and so foreign investors will need us. We will upgrade the capacity and expertise of our staff to meet the demand of partners and to keep pace with the international integration process of Vietnam.

• Nguyen Thoa