Vietnam gov’t warns of interest groups profiteering from SOE privatization

The Vietnamese government has issued a resolution urging economic corporations and state-owned enterprises (SOEs) to prevent interest groups from profiteering during their processes of privatization and divestment of state capital.

Those that are responsible for the delay of SOE privatization process would be punished. Photo: Thanh Hai.

The privatization and divestment of state capital must be carried out in a transparent and fair manner, follow the market principles and current legislation, the resolution noted.

As such, the government requests related government agencies, provinces, cities and SOEs to speed up the draft of restructuring and privatization schemes in accordance with the law. Those that are responsible for the delay of these processes would be subject to disciplinary measures.

Meanwhile, local authorities and SOEs are responsible for working on financial solutions regarding their state assets, including land and properties, in compliance with law and avoid losses to the state.

The government asked representatives of state capital at enterprises in the post-privatization period to soon complete the process of listing shares on the stock market.

Leaders of SOEs subject to privatization process are asked to take responsibility in enhancing efficiency in their corporate governance.

From 2016 to September 2020, 178 SOEs had their privatization schemes approved with a total asset value of VND443.5 trillion (US$19.1 billion), of which the state capital was estimated at VND207.1 trillion (US$8.91 billion).

However, of these 178 SOEs, only 37 are from the list of 128 firms expected to be privatized by the end of this year under the instruction of Prime Minister Nguyen Xuan Phuc, or 28% of the target, which means that the remaining 90 should complete the process from now to the year-end.

Due to complicated financial situations, some large SOEs are facing difficulties in determining their own values, including Vietnam Posts and Telecommunications Group (VNPT), Vietnam National Chemical Group, Vietnam National Coal – Mineral Industries (Vinacomin), telco MobiFone, the Vietnam Bank for Agriculture and Rural Development (Agribank), among others.

The Ministry of Finance is in the process of drafting a proposal on SOE restructuring in the 2021 – 2025 period, with a focus on major state corporations to ensure greater efficiency in operation.

SOEs to be pioneers in developing new technologies

The government expected SOEs to take the pioneering role in research and development (R&D), especially in 5G technology, e-government, smart cities, among others, for which each economic corporation should be an innovation hub.

According to the resolution, SOEs should continue to develop business ecosystems and form value chains as part of the global economic integration process, while taking the domestic market as a foundation to expand their presence globally.

Given the huge state capital at disposal, SOEs should support the business community in creating supply chains and reduce their reliance on foreign input materials, at the same time take advantage of next-generation free trade agreements, including the Comprehensive and Progressive Agreement for Trans – Pacific Partnership (CPTPP) and the EU – Vietnam Free Trade Agreement (EVFTA), to further penetrate new markets and promote Vietnamese brands.

Notably, SOEs are tasked with investing in the fields that their private businesses are reluctant to invest in or related to national security. In this regard, the government would continue to assess the efficiency and role of SOEs in the economy.

Additionally, SOEs continue to contribute to the economic restructuring process and keeping macro-economic stability.

The government would continue to hold a majority stake at state-owned commercial banks, and have presence in companies operating in fields that are essential to the economy, including electricity, food production, telecommunications, national security, among others.