8:49:16 AM | 1/15/2020
Divestment and equitization of State-owned enterprises (SOEs) failed to meet the plan in 2019. However, efforts to amend Decree 126/2017/ND-CP and Decree 32/2018/ND-CP were expected to clear bottlenecks and speed up progress in the coming time.
According to the Ministry of Finance of Vietnam, in 2019, nine SOEs were approved for equitization. The proceeds from equitization and divestment reached about VND14 trillion (US$610 million) out of the target of VND50 trillion (US$2.2 billion) in 2019.
In the 2016 - 2019 period, 168 SOEs were ratified for equitization, of which only 36 out of 128 companies were equitized under the plan set for the 2017 - 2020 period, fulfilling 28% of the plan. As many as 92 SOEs must go public in 2020.
Regarding SOE divestment, only 13 SOEs were divested, bringing in VND1,839 billion (US$80 million) under Decision 1232/QD-TTg. From 2017 to date, only 8% of planned SOEs were divested.
The State Capital Investment Corporation (SCIC), the largest seller of State capital, realized only 17% of its equitization plan in 2019.
From 2017 to the end of September 2019, SCIC successfully sold stake in 53 SOEs, of which it sold all stake in 49 companies and partly sold stake in four companies. Its proceeds amounted at VND20,133 billion (US$875 million), much higher than the cost price of VND3,483 billion. The profit was VND16,651 billion, 5.8 times higher than the cost price, compared with the national average of 1.48 folds in the 2011 - 2015 period.
The slow divestment and equitization affected State budget revenue and business development as well as the stock market. According to regulations, after one year of equitization, they must be listed on the UPCOM market. If SOEs complete equitization, they will help expand the stock market.
In fact, in the SCIC list, many companies have difficulty with divestment and have experienced many failures. Many offers by SCIC had no buyers, for example the share offers of Sa Giang Import and Export Corporation (SGC), Domesco Corporation (DMC), Vocarimex Corporation, Quang Ninh Thermal Power Company.
Slow SOEs divestment and equitization is attributed to various causes, including company valuation. Companies refuse to provide information about many intangible assets like patents, inventions and specific software related to business know-how and this makes it hard to determine the company value in general and the value of intangible assets.
The difficulty in SOE restructuring also stemmed from various causes, including objective factors like legal corridors and production and business situations, as well as subjective elements like administering authorities and SOEs themselves. The big difference between current regulations on state capital sales and international practices did not interest investors.
As for divested companies, the difficulty results from shareholder structure and business performance. Too low ownership ratio of the government or the controlling ratio of certain shareholders (over 51%) also reduces the appeal of state capital offered for sale.
In order to minimize these difficulties, the Ministry of Finance is amending Decree 126/2017/ND-CP and Decree 32/2018/ND-CP to accelerate SOEs equitization and divestment. The new Decree 32, if approved, will remove many bottlenecks in valuation. For example, the advantage of provisional historical and cultural values of 1% will be eliminated; the advantage of land use rights will be approached closely to the Land Law, bringing company value closer to real value. The revised Decree 32 is expected to make the divestment picture of 2020 brighter. Similarly, the revised Decree 126/2017/ND-CP may accelerate the equitization of large-scale, potential state-owned enterprises.
Huong Giang (Vietnam Business Forum)
Vietnamese
