SOEs to Be Restructured to Become “Pillars and Leaders”

10:38:07 AM | 22/3/2021

The draft project on State-owned enterprise (SOE) restructuring, with a focus placed on SOEs in 2021-2025, was recently completed and submitted by the Ministry of Finance to the Government.

The draft rule emphasizes that: In 2021-2025, it is necessary to further improve, supplement and accelerate the construction and enforcement of restructuring schemes to further boost the operational performance of SOEs. According to the Ministry of Finance, despite many efforts for SOE restructuring in 2016-2020, expected restructuring outcomes were not reached.

Restructuring fails to catch up with the plan

Assessing SOE restructuring in the 2016-2020 period, the Ministry of Finance said: There have been a lot of policy changes in the past five years. Specifically, the legal system for SOE restructuring has been fully enacted to ensure closeness, publicity and transparency, and maximize State interests. In particular, difficulties have been removed in order to speed up SOE equitization and divestment as well as prevent the loss of State capital and assets.

In the past five years, only 39 SOEs have been equitized as planned, while 89 businesses have not completed this process.

The report also stated that, according to the approved plan, the total expected value of selling State shares to investors is VND104,726 billion, equivalent to 48% of the total value of State equity in equitized enterprises during this period. Proceeds were only VND22,748 billion, equal to 23% of the plan, 11% of the value of State capital in these SOEs. However, proceeds collected from equitization by the Business Restructuring and Development Support Fund were VND36,518 billion, 1.6 times higher than the offering price.

Also according to the plan for the 2016-2020 period, the State divested from 348 enterprises with a total book value of VND60,000 billion. But in the past five years, it divested from only 106 SOEs, or 30% of the plan. Proceeds from this valued VND6,493 billion, equal to 11% of the plan.

Enhancing the performance of leading businesses

The draft SOE restructuring project for 2021-2025 clearly points out that SOEs must improve their performance to reach modern manufacturing technology and techniques on par with those in other countries in the region.

Fully meeting international standards on corporate governance and aligning the SOE development strategy with sector and regional development strategies, SOEs will thus become the core force of socio-economic development and lead other economic sectors to move forward together.

Restructuring measures must bring SOEs toward international practices as well as Party and State policies, especially in important and essential sectors and fields of the economy. Enhanced supervision and inspection into SOEs is needed to improve SOE operations, and promptly detect and strictly handle corruption cases that lead to loss of State property.

The draft scheme highlights continued actions and more drastic efforts to speed up delayed projects, handle ineffective investments, and deal with prolonged losses of SOEs on the basis of publicity and transparency in consistency with market principles and laws.

The draft sets out the goals to be achieved. Firstly, it is important to complete a policy system for SOE restructuring; and completely handle loss-making and ineffective projects in 2011-2020 by clearly defining the accountability and responsibility of persons to prolonged loss of SOEs and loss of State assets. There is a need to work out plans and roadmaps for effective settlement of this reality in a quick manner, and to prevent corruption and bad deeds during this process.

The scheme also includes speeding up SOE restructuring to basically complete this process by 2025. After public and transparent equitization and divestment, SOEs will then adopt a new representation model proven to bring the best outcome for enterprises.

Besides issuing the “SOE restructuring scheme, with a focus on corporations in 2021-2025", in the first quarter of 2021, the Prime Minister will issue “classification criteria applied to State-invested enterprises planned for equitization and restructuring in 2021-2025.”

Accordingly, the classification will be based on industry and field engaged by State-invested enterprises planned for equitization and restructuring in 2021-2025. There will be three categories.

Category I includes enterprises active in industries and fields where the State needs to hold 100% stake, including 12 industries and sectors, mainly related to security and defense, natural monopoly, social security and public interest.

Category II consists of equitized and reshuffled enterprises where the State holds 65% or more of the total shares, engaged in eight industries and sectors that relate to important infrastructure that promotes the nation’s social and economic development or balances the economy.

Category III is comprised of reorganized and equitized enterprises where the State holds from more than 50% to less than 65% of interests, including seven industries and sectors that are important to the country’s social and economic development, such as the making of basic chemicals, telecommunications services with network infrastructure, cigarette and petroleum.

The scheme advocates further decentralizing and authorizing board members; enhancing inspection, supervision and audit of loss-making companies or those with unprofitable, slow-moving or ineffective projects.

In addition, it is necessary to review the entire land fund that is being managed and used to make property and land rearrangement plans in accordance with the law; focus on resolving all financial problems before valuation agencies determine the value of SOEs to be equitized. Equitized enterprises must strictly comply with regulations on public trading or listing on the stock market.

In the long term, they need to clearly define their business lines and orientations to better anticipate any change in supply and production chains in the region and the world, and apply international standards to corporate governance.

In 2021-2025, information publicity and transparency concerning SOEs will be enhanced for all stakeholders to monitor them in an easy manner. It is also important to raise the responsibility of leaders of State bodies and executives of SOEs with respect to the ratification of corporate restructuring plans, and exercising supervision over the implementation of approved plans.

Source: Vietnam Business Forum