Existing Hardships for Equitized SOEs

Equitizing State-owned enterprises (SOEs) and divesting State capital from companies is among the top priorities of the Government. Although this transformation is producing progress in business performance, this work is still facing numerous difficulties.

According to the Prime Minister’s Official Letter 991/TTg-DMDN dated July 10, 2017, as many as 127 SOEs will be equitized from 2017 to 2020 (44 in 2017, 64 in 2018, 18 in 2019 and one in 2020). But, this plan has been much slower than expected.

Vietnam equitized 147 SOEs from 2016 to November 2018, including many large-scale corporations. In 2017 alone, the revised value of equitized SOEs exceeded VND160 trillion (US$7 billion), equal to 81.5% of the total value of equitized SOEs in 2011 - 2015, and divestments from other companies brought back nearly VND155 trillion (US$6.7 billion) from 2016 to 2018. Restructured SOEs have focused more on core businesses and played economy-regulating roles. Their performances improved after they went public.
Mr. Pham Duc Trung, Head of the Enterprise Development and Reform Department under the Central Institute for Economic Management (CIEM)), said, most equitized SOEs have better business results than before they went public. Thus, equitization or privatization is really a measure to improve the operational performance of SOEs. That is why equitization is said to be the key solution to SOE restructuring.

From 2016 to November 2018, Vietnam sold shares originally worth VND17,826 billion for VND155,735 billion. In 2016, it fetched VND6,839 billion from selling shares originally worth VND3,645 billion. In 2017, it sold shares with a total nominal value of VND9,046 billion for VND138,327 billion (including divestments in Sabeco and Vinamilk). In the first nine months of 2018, it earned VND10,499 billion from selling shares initially worth VND5,067 billion.

Data from the Corporate Finance Department under the Ministry of Finance show that the performance of equitized companies progressed to a better side. Most increased in total assets and profits. However, a few still failed to adapt to the market mechanism, resulting in losses. According to the department, 35 equitized businesses suffered total losses of VND844 billion and the total value payable to the State Budget was VND47,297 billion. Many big corporations incurred loss after going public like Ha Tinh Minerals and Trading Corporation which suffered VND70 billion in loss and LICOGI Corporation VND59 billion.

This revealed that transforming SOEs into joint stock companies is not a rosy path. Equitized businesses must live through emerging hardships to get better. Many even cannot preserve owner’s equity capital, including Quang Nam Food and Services Joint Stock Company which reported a negative owner equity capital of VND79 billion and Da Nang Import-Export Joint Stock Company that saw a negative owner equity of VND41 billion.

Dr. Luu Bich Ho said, equitized enterprises urgently need to float their shares on the stock market. This is considered an important measure to accelerate innovation and modernization, manage and improve operational performance, gradually perfect its governance and expand operations to meet market needs.

SOE equitization will continue to go on. It will be hard to meet the equitization and divestment plan. In addition to the Government’s resolve, the response of equitized businesses, the effort of State Business Capital Management Committee and the engagement of all relevant agencies are essential. Having these together will create resilience for them when Vietnam enters the second phase of doi moi (renovation): Clearing bottlenecks and drags on equitization process.

Binh MInh