SOE Restructuring: New Hopes

 

According to Deputy Minister of Planning and Investment Dang Huy Dong, with an ambition to create breakthroughs in SOE reform, the draft document that modifies the Prime Minister’s Decision 37 boldly adds some new points.

 

He said the role of SOE classification categories and criteria is very important as it is a prerequisite for reshuffling and reforming SOEs administered by central and local authorities. In the latest five years, SOE criteria and classification list have been friendly updated by the Prime Minister like Decision 14/2011/QD-TTg dated March 4, 2011 and Decision 37/2014/QD-TTg dated June 18, 2014 on SOE criteria and classification. Currently, the Government has assigned the Ministry of Planning and Investment to study, adjust and supplement the drafting of the Decision on the criteria and SOE classification list in the 2016-2020 period.

 

Le Manh Hung, Deputy Director of Business Development Department under the Ministry of Planning and Investment, said SOE equitisation is very tough work. According to the plan, 531 SOEs will go public from 2011 to 2015. However, from 2011 to June 2015, only 335 SOEs went public, fulfilling 63 percent of the plan. Thus, in the last four months of this year, as many as 196 SOEs will have to complete equitisation plans. Public offering value approximated VND12 trillion, equal to 10 percent of total shares offered. Needless to say, the ratio of shares offered to the public is low and the State can sell more shares in SOEs.

 

After going public, the State still keeps 100 percent of stake in many fields as real estate, culture, trade, bus station, tourism and engineering. State holding ratio in equitised enterprises is still relatively high in a many sectors like construction, transportation, food processing and trade. Therefore, changing criteria and SOE classification category is essential to speed up SOE reshuffling in the 2016 - 2020 period. The Government assigned the Ministry of Planning and Investment to research and adjust criteria to lay the groundwork for SOE base construction.

 

Contents of the draft decision in place of Decision 37 will have five new points. Accordingly, only first-tier companies can operate in the form of holding company instead of two tiers as earlier to match new provisions in the Law on State Capital Management and Use. The draft narrows SOE classification criteria, divided into three groups: Wholly State-controlled fields, fields and branches with 65 percent of State stake, and fields with 50 - 65 percent of stake.

 

Remarkably, the draft decision has moved "Oil and natural gas refining,” “air transport,” “cigarette production” from the list of SOEs where the State holds from 65 - 75 percent of stake to SOEs where the State keeps over 50 - 65 percent of stake. The draft has also eliminated some sectors where the State holds the stake like protective forest and rubber and coffee trees grown in localities disassociated with national defence and security tasks.

 

Hung said new SOE classification methods and criteria will be streamlined to a maximum. In this modification, the Ministry of Planning and Investment asked the Prime Minister for permit to build a master plan for SOE reshuffling.

 

Pham Van Thanh, Director of Investment Planning Department under the Vietnam Rubber Group (VRG), said VGR is currently managing 200,000 ha of rubber trees. If the State does not keep controlling shares, businesses will decide to adopt new potential crops on their own and even change land-use purposes. Hence, he proposed bringing rubber trees out of the list of industries that the State does not hold controlling shares.

 

Mr Cao Minh Tuan, a representative from the General Directorate of Railway, said that the Vietnam Railway Corporation has two big companies: Di An Railway Company and Gia Lam Railway Company, which repair trains and cars. Once going public, the production and supply of locomotives and carriages will be more difficult because the State will only hold below 50 percent of stake or even zero. Hence, he suggested bringing these units to a group of companies where the State holds at least 51 percent of stake.

 

Deputy Minister Dang Huy Dong said that the Ministry of Planning and Investment will seriously consider and select opinions from enterprises and complete the draft document in the spirit of Prime Minister’s guidance. The draft planning is expected to help speed up SOE restructuring progress.