Why are equitization slow? – Many “big enterprises” speed up but still… slow

Why is equalization slow? That will be well recognized by management authorities, as well as from ministries, branches, localities, corporations and state corporations. This issue will be mentioned by Customs.

It is expected that in July 2017, the Vietnam Rubber Industry Group will issue shares to the public through auction method. Photo: ST.

Only equitize 6 enterprises.

According to statistics from the Ministry of Finance, in the first 6 months of 2017, 19 enterprises were approved their equitization plans by the competent authorities. The total actual value of 19 enterprises is 31,331 billion vnd, of which the actual value of state capital in those enterprises is 7,942 billion vnd. According to approved equitization plan, the authorized capital of the 19 units is 8, 822 billion vnd, of which the State holds 4,035 billion vnd; 3,073 billion vnd sold to strategic investors; 69 billion vnd sold to employees; 12 billion vnd sold to union organization. The number of shares for public auction is 1.630 billion vnd. More specifically, the report of the Steering Committee for Enterprise Reform and Development said that in the past six months, the country has just equitized completely 6 companies.

Many "big" companies have actively speeded up equitization such as Vietnam Rubber Industry Group, Vietnam Southern Food Corporation (Ministry of Agriculture and Rural Development), Power Generation Corporation No. 1, No. 2, No. 3 under the Electricity of Vietnam Group (total value of capital 90 trillion vnd); announced the value of one enterprise with capital of about 24 trillion vnd of PetroVietnam Powever Corporation, PetroVietnam Oil Corporation (PVOil) belonging to Vietnam Oil and Gas Group; approved equitisation plan of Urban and Industrial Zone Development Investment Corporation (IDICO), Song Da Corporation (the Ministry of Construction)...

Also in the first half of 2017, the units have divested 3.466 trillion vnd, earned 14.842 billion vnd. Specifically, the capital divestment in 5 sensitive areas was 47 billion vnd, earned 46 billion vnd; the divestment of investment in other enterprises (out of the 5 sensitive areas) was 2,024 billion vnd, collected 2,557 billion vnd. The State Capital Investment Corporation (SCIC) has sold capital in 20 enterprises worth 1,394 billion vnd; collected 12.238 billion vnd; including the number of divestment in 2016 of Vietnam Dairy Products Joint Stock Company (Vinamilk) with the value of 783.7 billion vnd, earned 11,286 billion vnd.

Although the Government and the Prime Minister have strongly directed the ministries, branches, localities, economic groups, State corporations and SOEs to focus on equitization and SOE restructuring, the results have been slow, not met the demand. The number of 6 enterprises completing equalisation compared with the target of 45 enterprises in the plan by 2017 or 137 enterprises by 2020 set by the Government in the project "Restructuring SOEs, focusing on the economic groups and state corporations in the period 2016 - 2020" is still quite far away.

Analyzing the cause, Mr. Dang Quyet Tien - Deputy Director of the Corporate Finance Department of the Ministry of Finance says that there are both objective and subjective reasons. The objective reason is that theequitization and divestment object in this period is mainly large-scale and wide scope enterprises, multi-businesses and financial complex, which need the participation of many large investors that should take a lot of time to prepare, handle and audit before announcing the value of enterprise. Moreover, the stock market has recovered but it has not really attracted investors to buy shares of SOEs when equitization. The subjective reason is that some leaders of SOEs are still hesitant to take responsibility for implementing equitization. In addition, the transfer of equitized enterprises to the SCIC is still slowly. Equitized companies have been slowly to register for listing on the stock market (578 enterprises have been nominated by Deputy Prime Minister Vuong Dinh Hue).

Explaining the reasons for the "bottom position of the list" as no company was equitized, Vice Chairman of the HCM City People’s Committee Le Thanh Liem said that 39 SOEs must equities by 2020 are mostly public companies, the delay in implementation because of the approval for equitization plan of the City’s Party Standing Committee. However, these SOEs completed asset inventory, strategic investor criteria. As getting the City’s Party Standing Committee approval, they will be done in 2018. Mr. Liem said that we should be caution in equalisation, divestment because if "introducing into the market" massively, it can not "digest" a large amount of State property.

Vice Chairman of Hanoi People’s Committee Nguyen Doan Toan says that many places are waiting for the Ministry of Finance to amend some mechanisms and policies on equitization, divestment to implement easily that makes the progress slowly.

Consider liability if taking it slow.

Agreed with the Ministry of Finance, Deputy Prime Minister Vuong Dinh Hue, at a meeting to review equalisation and divestment implementation (July 11, 2017), said that the main cause of the delay was the direction and administration of some ministries, branches, localities, economic groups, state corporations were not fierce. They are psychological cautious, waiting, afraid of some cases that were previously inspected, so they blamed on each other or consulted to the Government. The competent ministries and localities are not dare to make decision, often submit to the Government to consult for safety, but the government decided that not follow the law.

Some units are afraid to do, afraid of wrong, the inspection, supervision, and urge are not often and timely. The experience is that what the ministries are fierce, they will get good results, where leaderships are not drastic, the results are very limited.

According to the Deputy Prime Minister, if from now until the end of the year, the equitizing successfully a large enterprise, the converted capitalization rate will be very large, creating good governance. Therefore, it is absolutely necessary to strive to complete equitization and divestment plan in 2017, even exceed the number of equitized and divested enterprises, and even the state budget revenue target from the divestment. The government will consider the responsibility of the leaders of ministries, branches, localities, groups, corporations who delay, fail to complete the tasks of reforming equitization, and divestment.

From the management agency, to speed up the process of equitization and divestment, the Ministry of Finance will try to complete early the amendment and replacement of two important documents: Decree No. 59/2011/ND-CP on equitization in SOEs and Decree No. 91/2015/ND-CP on investing state capital into enterprises and managing and using capital and assets in enterprises.

The basic policy changes will boost the operation of enterprises in general and the transformation of state-owned enterprises into joint stock companies in particular, as well as the process of transferring state capital /capital of SOEs, invested in the enterprises in the coming time will be effective, preventing loss of capital and state assets in the enterprises.