Jun 03, 2018 / 08:48

Government pushes SOE equitisation

The government has required some State-owned enterprises (SOEs) to expedite their equitisation and divestment progress as it remains behind schedule.

According to the Ministry of Finance, competent state bodies ratified equitisation plans of only five SOEs in the first five months of this year. Meanwhile, the government targeted to equitise at least 85 SOEs in 2018.
In addition, up to 181 SOEs have been also passed to divest state capital this year, however, only one has so far completed the work, the ministry reported.
The equitisation plan of Dak Lak Rubber Company was approved in 2018
The equitisation plan of Dak Lak Rubber Company was approved in 2018
As the equitisation might fail to meet the target, the government has directed the SOEs to speed up the equitisation and divestment to complete the works in 2018. For SOEs, which might fail to meet the deadline, must promptly report difficulties and hindrances to the Prime Minister for consideration and settlement.
The SOEs have been also directed to urgently make their land use plans in accordance with legal regulations and submit it to competent state bodies for approval. 
Representatives of the State capital at joint stock companies also have to request the companies to promptly register and list on the stock markets as regulations.
The government considers 2018 a key year in the country’s restructuring plan of SOEs, targeting to equitise at least 85 SOEs in the year with 64 of which being large size.
According to Dang Quyet Tien, director general of the Ministry of Finance’s Department of Corporate Finance, the number of SOEs earmarked for equitisation and divestment in 2018 account for over 50 and 46 percent of the total number planned for 2017-2020.
Although the process has been determined as a key policy towards SOEs and for the whole economy in general, it has encountered many obstacles, notably the influence of interest groups on the equitisation process, difficulties in the search for consultants and enterprise evaluation, especially large ones with complex structures and operations in various industries.
One of the largest obstacles to the equitisation is SOE evaluation. According to State Audit Office of Vietnam, legal regulations concerning enterprise evaluation have many flaws in terms of land use rights, brand value, the selection of evaluation firms and determining the market value of SOEs’ assets.
Therefore, it is necessary to use auditing tools to accurately determine the value of SOES and deal with financial problems before announcing their values, especially large SOEs operating in special sectors.
The case of the Vietnam Feature Film Studio equitisation shows that, for a long time, the value of land and other advantages is not fully counted into the value of SOEs. That is why many are interested in loss-making SOEs, not because of their brands but because they are managing lucrative plots of land.
As a result, the Ministry of Finance has recently advised the government to stipulate the incorporation of the value of land use rights, brands and business advantages.
The main reason that makes SOE equitisation less attractive to strategic investors is the limitation on foreign ownership in a number of industries. Therefore, experts have advised that the government should consider relaxing the rules to permit foreign strategic investors to hold dominant stakes in industries that do not directly affect national security and sovereignty.
With the government’s bold actions in fine-tuning the legal framework and addressing difficulties, the SOE equitisation process is expected to be accelerated and achieve better quality.