SOE Privatisation: Motivation for People Engaged in Economic Development

The government is quite optimistic about the outcomes of equitisation of the SOEs after hearing the report. The ministries are committed to completing the equitisation plan of the SOEs in 2014 and 2015. However, some ministers still expect that the government will be more determined in the implementation of the equitisation process. The government also requires the ministries to be firmer in this process.

 

Prime Minister Nguyen Tan Dung expressed his determination to ask equitised enterprises to be listed upon meeting all conditions. Their business operation and financial activities will then be disclosed, making it transparent to the investors. Lack of transparency is what most domestic and foreign investors have been most concerned about in the past decades.

 

In fact, the 24-month equitisation plan has gone 15 months with 143 enterprises equitised out of the target of 432. But this is not a big problem. However, it is not difficult to equitise the rest of the enterprises for many reasons. According to Nguyen Van Tung, Vice Chairman of the Government Office, up to March 24, 207 enterprises had their assets valued; 81 others planned to announce their value.

 

The equitisation results of the past 15 months are reported optimistically. On the results of divestments, nearly VND5 trillion has been divested, equivalent to 1.42 times the book value. Viettel Mobile made the highest divestment of VND2,655 billion, fetching VND3,169 billion; Vietnam Oil and Gas Group divested VND307 billion, earningVND1,068 billion; Post and Telecommunications Group divested VND481 billion, earning VND526 billion.

 

Prime Minister Nguyen Tan Dung said that the restructuring of SOEs in 2014 and in the first three months of 2015 reflects positive results of equitisation and divestment as planned. Along with these equitisation activities, the SOEs have adjusted their strategies and business investment objectives by concentrating on core business areas, business management innovation, and transparency. The financial performance of the companies have been improved and shown through total assets of the SOEs of VND3.2 trillion, and the state capital is preserved and increased to VND1.2 trillion. The revenue and profits of the company as well as the income of the workers increased. In particular, the equitisation has created new businesses and attracted investment flows from outside, which help improve the market economy, especially in the capital market and the stock market.

 

According to the Prime Minister, equitisation brings many advantages and if we want to mobilise social capital, the government should not have much involvement in business activities. The state budget should be devoted to other more necessary areas. He emphasized that if the government still holds much, this will discourage the investors.

 

The Prime Minister said that the restructuring of SOEs has many shortcomings because the efficiency of SOEs is not commensurate with their potential and resources and capital assets. Among the enterprises, some are inefficient and unprofitable and the labour productivity is low. The equitisation is still slow. The equitisation brings more gains than losses to businesses because it helps the businesses become stronger. It is necessary to create conditions and incentives for any type of business in the economy because they are all the Vietnamese enterprises.

 

According to the report of the Steering Committee of the business reform and development, the delay by a number of agencies also negatively affects the divestment progress. It is noted that the State Bank of Vietnam (SBV) responded slowly to the divestment of a number of state corporations and groups in the banking sector. Besides, three ministries including Agriculture and Rural Development, Finance, Planning and Investment, along with the SBV, have not submitted 10 written legal documents to guide the implementation of Decree 118 of the Government on the arrangement, innovation and development, and improvement of the advanced performance of the state-owned enterprises in agriculture and forestry, so there have not been adequate legal fundamentals for the ministries, localities and enterprises to start implementation.

 

Sharing the difficulties, Dan Duc Hiep, Vice Chairman of Hai Phong People’s Committee, said one of the biggest difficulties is to restructure public enterprises, especially in the water sector. Many ideas are against the equitisation of the water company of the city because of its key role in public services. To address this problem, the Prime Minister said that the equitisation of the water supply enterprises not only guarantees water quality but also improves water quality. Deputy Prime Minister Vu Van Ninh cited that many provinces like Ha Nam have equitised the water supply enterprises and obtained many positive results.

 

The Minister of Transport proposed that the government drastically implement the equitisation. Minister Dinh La Thang suggested that the Government soon pass plans of selling 80 percent of Saigon Port and Hai Phong Port. He also recommended that the package of shares should be fully sold to attract more potential investors. In addition, he proposed all of the shares of the enterprises in building and waterway transport should be sold out. According to Thang, the government will no longer have to watch over the losses of their money.

 

According to Minister of Information and Communications Nguyen Bac Son, the enterprises in communication are successfully restructured. For example, MobiFone has reached 50 percent of profit margin. The corporation employed 5,000 staff and its budget in 2014 was about VND4 trillion. We requested the Prime Minister to approve MobiFone setting their own salary policies like Viettel.

 

According to the Prime Minister, institutional frameworks and policies are fully prepared, the rest of the work relies on determination and responsibility of the government; he emphasized the enterprises that do not require the involvement of the government should have public engagement to increase business performance and generate effective outcomes of the enterprises. The Prime Minister also noted that each minister must evaluate and proposes equitisation plans for enterprises that do not need the domination of the government to guarantee dynamism and efficiency.