Opportunity to Put an End to SOEs’ Long-lasting Losses

 

Overarching viewpoint of restructuring process is to divest in non-core business fields, based on the market principles. The State will give up ownerships in enterprises it does not need to hold controlling power. The restructuring is performed based on industries and fields regardless of management agencies and levels.

The restructuring of State-owned economic groups and corporations will be comprehensively performed on organisational model, governance, personnel, production and business scopes, development strategy, investment and product marketing. The reorganisation of some SOEs must suit realities and their missions.

 

The classification of SOEs for the purpose of restructuring will be a decisive starting point for the final result of the project. According to criteria, SOEs will be classified into three groups.

 

The Group 1 includes companies where the State holds 100 percent of charter capital and that operate in the fields of State monopoly, national defence and security; publication; transport safety; lottery; large-scaled electricity generation and distribution of special significance to socio-economic development, national defence and security; management and exploitation of national railway infrastructure; airports; first-grade seaports; and money printing and minting.

 

The Group 2 consists of equitised enterprises where the State holds over 50percent of charter capital, operate in the fields defined in the Prime Minister’s Decision 14/2011/QD-TTg dated March 4, 2011 on criteria and classification index for SOEs. The State owns more than 75 percent of charter capital in large-scale companies operating in the fields of mining and natural resource processing, and supplying communication information infrastructure networks. It keeps 65 - 75 percent in large-scale enterprises operating in the fields of basic chemical; chemical fertilisers; food wholesaling; medicine wholesaling; pharmaceutical production; finance, credit, insurance, water supply and drainage; sanitation, lighting in large urban centres; production and storage of plant varieties and livestock; vaccine production; management and maintenance of roads and waterways; seaport management and operation; electricity production; and railway and airway transportation. The remaining companies in the group, equitisation, based on the specific situation and market capacity, the State holds from 50 percent to 65 percent of the charter capital or hold shares. The State will base on practical conditions to consider holding from 50 percent to less than 65 percent of stake in other equitised companies.

The Group 3 consists of SOEs which operate inefficiently and suffer from prolonged losses.

 

Regulations on equitisation, sale, handover, dissolution and bankruptcy will be modified or supplemented to match actual requirements. Existing difficulties and obstacles related to business valuation, financial processing, debts, land, employment policies, etc will be resolved.

 

The Government will concentrate on developing financial markets, especially stock market, debt trading market to facilitate the equitisation process and enable enterprises to access and mobilise capital for restructuring.

 

The Government requires ministers, branches and localities, boards of directors, boards of members of SOEs proactively study and propose remedies to arising problems related to regime, policy, mechanism, expense, debt, personnel policy and tax to competent authorities in the process of SOE restructuring.

 

The Prime Minister is due to approve restructuring plans for every enterprise in the third quarter of 2012. Each economic group or corporation established by the Prime Minister will have to submit its own restructuring plan to the Prime Minister. Major contents include redefinition of tasks, business lines, divestiture plans, development strategies towards 2015 and 2020, market demand forecasting, governance, as well as solutions to existing problems.

 

Financially troubled SOEs will clarify responsibilities of concerned officials while performing capital and asset restructuring. They may have to transfer capital, assets and merge projects to focus on more important tasks.

 

To implement this project effectively, the Government has assigned the Ministry of Finance and the Ministry of Planning and Investment to work out necessary legal documents. In particular, the Ministry of Finance will draft the following documents.

 

- Regulations on State investment capital in enterprises and financial management for State-owned enterprises (instructions to capital transfer in the process of SOE restructuring). This ruling is expected to be submitted in the second quarter of 2012.

 

- Regulations on functions, tasks, organisation and operation of the State Capital Investment and Trading Corporation. This is planned to be submitted in the second quarter of 2012.

 

- Regulation of financial supervision and performance assessment in SOEs. This is expected to be submitted in the second quarter of 2012

 

- Studies on debt settlement mechanism in the process of SOE restructuring. This is expected to be submitted in the fourth quarter of 2012

 

- Studies on amendments and supplements to regulations on transformation of wholly State-owned SOEs into joint stock companies. This is expected to be submitted in the fourth quarter of 2012

 

The Ministry of Planning and Investment is assigned the following tasks:

- Regulations on amendments and supplements to rights and obligations of State owners to SOEs (replacing Decree No. 132/2005/ND-CP). This is expected to be submitted in July 2012.

 

- Regulations on production and supply of public products and services (replacing Decree No. 31/2005/ND-CP). This is expected to be submitted in August 2012.

 

- Regulations on management and supervision of special SOEs (replacing Decree 101/2009/ND-CP). This is expected to be submitted in the fourth quarter of 2012.

 

- Scheme for separations of ownership function and management function at SOEs. This is expected to be submitted in August 2012.

 

- Studies on improvement of operating efficiency of SOEs, guarantee of leading roles of State economic sector in socialist-oriented market economy.). This is expected to be submitted in July 2012.

 

- Instructions on project handover in association with equity transfer.

 

Poor performances of SEOs are likely to disappear if this project is seriously and effectively carried out.