Enterprises after Equitisation: Remaining Impacted by Mechanism Applied for SOEs

Enterprises after Equitisation: Remaining Impacted by Mechanism Applied for SOEs

By November 30, 2004, 2,200 State-owned enterprises (SOEs) had been equitised. Under a plan with 100 projects approved by the Government, by late 2005, 850 more enterprises will have been equitised, bringing the total number of equitised enterprises to more than 3,000.

Up to 90 per cent out of 500 surveyed equitised enterprises have become profitable. The remaining enterprises are less profitable or aren't profitable yet. This figure is a good sign for equitisation. Why are SOEs still avoiding equitisation? Do equitised enterprises have a transparent and democratic apparatus?

Ho Xuan Hung, deputy head of the Board for Enterprise Renewal and Development, said at a symposium on post-equitisation enterprises hosted by the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi on December 17 that the management mechanism of equitised enterprises remained the same as the one applied to SOEs. This is because many enterprises, after being equitised, have to report to taxation agencies about their staff members' salary.  Based on this figure,  the taxation agencies will calculate their taxes.

Also, 71 per cent of directors of 500 surveyed equitised enterprises are former cadres of SOEs. Hung said that these directors preferred safe production and business activities to risky ones while the development of a stock company almost wholly depended on risky factors.

Inequality in mortgage for loans between SOEs and stock companies based on the equitisation of former SOEs has hampered the equitisation process.  In some places, mechanisms for SOEs, private and foreign-invested enterprises have been regulated with legal documents, while those for equitised enterprises are under construction. Thus, equitised enterprises lack a basis to develop their production and business activities.

Issues relating to shareholders are also urgent as on one hand many people have bought shares of enterprises via unofficial channels and they controlled activities of these enterprises for their own purposes. On the other hand, equitised enterprises still lack strategic shareholders. Most shareholders of equitised enterprises are their cadres and workers, who have yet to understand their rights and powers. Most ideas raised at the symposium were related to the need for increased democracy in enterprises, the reduction of the State’s stake and a more thorough review of the role of shareholders.

Tran Tien Cuong at the Central Institute for Economic Management under the Ministry of Planning and Investment said that one of the solutions for a transparency of management apparatus of joint stock companies was the involvement of some independent shareholders in the executive board to supervise its decisions. In many enterprises, the executive board is dependent on the management board. This had led to a lack of transparency in the executive board’s decisions and the companies being controlled by a minority of shareholders. Also, the supervising board of joint stock companies is acting as that of SOEs. As a result, the supervising board has yet to complete their functions set by conferences of shareholders. It almost always implements what is requested by the executive board.

Next year, equitisation will be the focal point in VCCI’s plans and the chamber will implement some projects under the sponsorship of the Ministry of Finance. With close co-operation from enterprises, equitisation and activities of enterprises after being equitised are hoped to become more effective.

• Nguyen Thoa