900 SOEs to Go Public in 2006

The Steering Board for Enterprise Renewal and Development plans to equitise 900 State-owned enterprises (SOEs) in 2006, in which 600 SOEs will be equitised with a minimization of state monopoly and removal of enterprise monopoly.

 

This is part of a plan approved by Prime Minister Phan Van Khai in June to carry out far reaching reform in SOEs, targeting to establish as many as 500 new joint-stock companies, eight economic groups and 93 State corporations this year.

 

In 2006, the State will keep its full control of the capital of its 1,800 enterprises while reducing its controlling stake at 900 equitised enterprises to gradually ease its dominance over the operation of these businesses.

 

The Government will pour more investment into major sectors while directing concerned agencies to rapidly work out proper mechanisms to help efficiently-run economic groups in their infancy, officials said.

 

Vietnam has no other choice than to boost the restructuring process, said Deputy Head of the Steering Committee for State Owned Enterprises Reform and Development Ho Xuan Hung. He added that about 80 general corporations will be shifted into holding companies.

 

Subsidiaries in corporations will be equitised, and then the mother companies. In several key groups to be formed in the future, there will be a multi-ownership mechanism, in which the state will hold the controlling stakes. He emphasized that SOE restructuring process may end in 2009 if Vietnam can gather its whole strength.

 

According to experts, however, equitisation has been going slowly compared to the demand for development.

 

Moreover, SOE equitisation has not been linked with enterprise restructure after equitisation. Privatised enterprises also have not attracted strategic and foreign investors. Equitisation mainly took place in small and loss-making SOEs.

 

It is reported that in 2005, Vietnam reorganized and equitised 933 SOEs, many of which were big enterprises, such as the Song Hinh-Vinh Son, Thac Ba and Pha Lai electric power plants, the Tan Mai Paper Company, the Oil and Gas Drilling and Service Company.

By the end of December 2005, privatised SOEs reportedly accounted for 12 per cent of total state capital in SOEs, a modest figure.

 

Between 2001-2005, 3,349 State-owned enterprises out of 5,655 had been rearranged, of which 2,188 were equitised, 252 were dissolved, and 416 others were merged, said the Steering Board for Enterprise Renewal and Development.

 

Equitisation of some large companies and plants, such as the Oil and Gas Drilling and Service Company and the Song Hinh-Vinh Son, Thac Ba and Pha Lai hydro-electric power plants, has initially proven effective in drawing more capital from the community to help enterprises modernise technologies, improve management skills and increase the efficiency of their operation.

 

Equitisation has breathed new life into the stock market. In 2005, eight additional companies posted their shares totally valued at VND508 billion to bring the total number of listed entities to 34, including 29 SOEs. Last year, State-owned enterprises earned a total revenue of VND680 trillion, a 12 percent rise over 2004, accounting for 40 percent of the country’s GDP.