​Equitization, divestment: An effective solution to improve the efficiency of SOEs

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Vinamilk's revenue increased 10 times after equitization. Picture: ST.

SOEs work more efficiently

Based on evaluation of the 2-year implementation of the Project, the Ministry of Finance recently released statistics on equitisation, divestment of SOEs. Accordingly, in 2016, there were 66 enterprises equitized with a total value of 40,206 billion VND, of which state capital is 27,328 billion VND. In 2017, there were 69 enterprises equitized with the total value of 365,953 billionVND, of which the state capital is 160,156 billionVND. In the first 11 months of 2018, there were 11 enterprises equitized with the total value of 29.634 billion VND, of which state capital is 15.329 billion VND.

Thus, there were 26/127 enterprises equitized under the plan approved by the Prime Minister, accounting for 20.4%. Units that have successfully implemented the plan are Vinh Long, SocTrang, Tuyen Quang, Ha Tinh, Dong Thap, Binh Duong, Bac Ninh, Bac Kan and Vietnam Television.

On the divestment, according to the Decision No. 1232/QD-TTg dated August 17, 2017 of the Prime Minister, the period 2017-2020 divested 406 categories, about 60,000 billion VND of state capital in enterprises. Apart from the divestment under the Decision No. 1232, units must also withdraw capital from sensitive and high risk industries and divest from non-core businesses, and divest under the restructuring plan approved by competent authorities.

In the period from 2016 to November 2018, the country has divested 17,826 billion VND, collecting 155,735 billion VND. Specifically, in 2016, it divested 3,645 billion VND, earning 6,839 billion VND. In 2017, the divestment was 9,046 billion VND, earning 138,327 billion VND (including state capital withdrawal at Sabeco and Vinamilk). In the first nine months of 2018, it divested 5,067 billion VND, collecting 10,499 billion VND. Of which, 18 units divested as planned in Decision No. 1232/QD-TTg with the value of 1.308 trillion VND, collecting 2,511 billion VND.

Although the process is delayed compared with the plan, the statistics on the performance and business efficiency of enterprises after the implementation of equitisation proved the effectiveness of equitisation, divestment.

According to the Ministry of Finance, compared to the previous year before equitization, the average profit before tax, the state budget collection, charter capital, total assets, turnover, average income of employees increased. For example, over 300 enterprises equitized in 2015 had the average profit before tax increased by 49%, the contribution to the budget increased by 27%, charter capital increased by 72%, total assets increased by 39%, revenue increased by 29%, the average income of employees increased by 33%.

Typically, the National Seed Joint Stock Company has a 20-fold increase in revenue, a 40-fold increase in profits, a 22-fold increase in total assets, and a 40-fold increase in equity. Vietnam Dairy Products Joint Stock Company had 10 times increase in revenue, 6 times increase in the contribution to the budget, equity increased 13 times. In 2017, total assets under the consolidated report of 294 enterprises with shares, state capital is 543,858 billion VND, increasing by 6%; equity increased by 14%; Total revenue increased by 21% compared to 2016; Total profit before tax increased by 11% compared to 2016.

Thus, the equitized enterprises still tend to grow steadily and develop. Corporate governance has a number of positive results since the promotion of SOE reform and restructuring. Strong innovations in policy and business law system have created a favorable legal and business environment for businesses of all economic sectors operating at the same time as strengthening the business environment. The transparency in business activities of enterprises.

Need determination

The obvious progress of SOEs after equitization, divestment is recognized, but it does not mean ignoring shortcomings, constraints and causes.

In the Ministry of Finance’s view, besides objective causes such as complicated economic, political and commercial developments in the region and the world, subjective causes remain the main causes.

This agency lists: Specifically, some ministries, branches, localities, enterprises have not been serious in implementing the plan, in complying with the reporting regime; role, awareness, responsibility of the head of enterprises, units are not highly motivated, not drastic; some SOEs are slow to innovate their corporate governance to improve business efficiency.

In addition, the equitisation process of SOEs should take time to deal with financial, land and labor problems in the pre-equitization period that leads to delaying the equitization.

From the objective angle, Mr. Phung Van Hung - Standing Member of the Economic Committee of the National Assembly, said: The reason is much in the determination, the readiness of a part of enterprises that is not high, leaders of enterprises are still “nostalgic”.

Mr. Hung said that it should be criticized. Along with that, the lead agency also needs to “dissect” and seek solutions to deal with issues related to legal, land, debt, finalization... in the case of large enterprises with large state capital, involved in many fields, activities.

In order to promote this work in the coming time, at the conference on “Renovating and improving the efficiency of SOEs operation”, to be held on December 21, the Ministry of Finance will propose to the Prime Minister a number of basic solutions to continue promoting the renewal and raising the efficiency of SOEs.

It stressed the need for ministries and branches to urgently improve the legal system for equitizing, restructuring and improving the efficiency of production and business activities of SOEs and enterprises with state capital. In addition, heads, leaders of ministries, branches and localities are responsible for urging and implementing the criteria for classification of SOEs, enterprises with state capital and the list of SOEs to be organized in the period 2016-2020 which has been approved by the Prime Minister.

Ministry of Finance also said that state-owned enterprises should be urgently reviewing the entire land fund being managed and used to make land use plans in accordance with the land legislation, and submit them to the provincial People's Committees for getting comments on the land plans and prices for competent authorities to approve before determining the value of equitized enterprises.

Representatives of owners should instruct representatives of state capital portions to urge equitized enterprises to strictly register their transactions and to list on the securities market according to the provisions of law.

Particularly, resolutely handle SOEs, investment projects with slow progress, losses and inefficient operation under the market mechanism; intensify the examination, inspection, supervision and auditing in order to prevent loss of capital and state assets in the process of reorganization, equitization and management and use of state capital; periodically publicize information on equitisation, re-allocation of SOEs as a basis for monitoring and evaluating equitisation and divestment progress, promptly removing difficulties and problems in the course of implementation.

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Mr. Nguyen Hong Long, deputy head of the Steering Committee for Enterprise Renovation and Development, said that: the performance of SOEs is still increasing, but their capacity is limited. The equitisation, divestment is just a method to improve the performance of enterprises with the main goal is to help them operate more effectively. To be effective, the core is still that businesses have to change the management mechanism, thereby changing the mode of production and business operations, ensuring transparency.