Slow SOE Equitization, Why?

The Ministry of Finance said, by the end of the second quarter of 2019, six State-owned enterprises (SOEs) were approved for equitization by competent authorities, but only one was equitized according to the Official Letter 991/TTg-DMDN.

By the end of the second quarter of 2019, 35 out of 127 SOEs were equitized under Official Letter 991/TTg-DMDN. Thus, the SOE equitization progress failed to fulfil the plan. Only 92 out of 127 enterprises went public, accounting for 72% of the plan.

Mr. Dang Quyet Tien, Director of Corporate Finance Department (Ministry of Finance), said that the divested value from SOEs totaled VND3,831 billion from the cost price of VND2,092 billion in the first six months of 2019. The belated divestment plan required more aggressive involvement of relevant units and responsibility of their leaders. According to Decision 1232/QD-TTg dated August 17, 2017 of the Prime Minister, 62 SOEs would be divested in 2019.

By the end of the second quarter of 2019, nine companies divested VND759 billion worth of shares under Decision 1232/QD-TTg, taking VND1,657 billion. Specifically, the Ministry of Construction sold shares worth VND690 billion of book value at Viglacera Corporation for VND1,587 billion. Thus, from 2017 to the end of the second quarter of 2019, 88 companies had divested VND4,549 billion (original value) for VND8,765 billion (selling value).

Under the SOE Restructuring Scheme, large-scaled SOEs divested VND1,333 billion and collected VND2,174 billion by the end of the second quarter.

Specifically, Viettel Corporation made a divestment of VND1,290 billion at Vietnam Construction and Import-Export Corporation (Vinaconex) for VND2,002 billion and State Capital Investment Corporation (SCIC) sold shares with the original value of VND36 billion for VND166 billion.

On August 15, 2017, the Ministry of Finance announced the list of 747 equitized enterprises that had not registered for listing on the local stock market, according to a ministry’s official.

According to the review of the State Securities Commission of Vietnam (Ministry of Finance), by the end of the second quarter of this year, 622 equitized companies had not registered for trading or listing on the stock market. At the same time, the Ministry of Finance continued to review and add 158 SOEs to the list of equitized enterprises obligatorily subject to trading or listing on the stock market. So far, there are 780 equitized enterprises have registered for trading or listing on the stock market.

However, according to Mr. Dang Quyet Tien, although the progress is slow, the quality is more assured. Equitization plans are meticulously built to ensure transparency. Divestments are based on market principles and unsuccessful public offerings are put up for competitive auction. Therefore, equitization proceeds are quite good.

The representative of the Ministry of Finance said, some ministries, branches, localities and SOEs have not been serious about equitization, divestment and restructuring plans under the direction of the Prime Minister and abided by the reporting regime. The role, awareness and responsibility of SOE leaders are still not high.

In addition, restrictions on slowing equitization are also reiterated. Indeed, the SOE equitization process needs a lot of time to deal with financial, land and labor issues before equitization. Land issues have sometimes caused SOEs to change its equitization plans.

The ministry’s representative affirmed that equitization is an important solution to SOE rearrangement, reform and restructuring. SOE equitization mechanisms and policies have continued to be amended and supplemented. Equitization and divestment results have had positive impacts on the stock market development and improved performances of equitized companies, including revenue, tax payment and payrolls.

Hien Le