According to the Ministry of Finance, Vietnam equitised 632 SOEs in 2011-2017, with the total value of the state’s stake determined at VND374 trillion (US$16.456 billion). A number of typically successful cases included the equitisation of dairy producer Vinamilk, beer and beverage producer Sabeco and Kim Lien Hotel.
However, Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research, said that the progress of SOE equitisation remains behind schedule, while the quality is also low.
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.
Echoing Thanh, Director of the Vietnam Institute of Economics Tran Dinh Thien stated that the progress of and number of equitised SOEs are basically guaranteed but the quality remains low.
Thien cited that among the 96.5 percent of equitised SOEs, only 8 percent of state capital is transferred to the private sector, which means the process has failed to move national resources from a less efficient sector to one which is more efficient.
With just 8 percent of state capital sold to the private sector, the state remains the dominant owner of these enterprises, while other sectors are still marginalized, thereby limiting the impacts of the process on corporate governance reform and efforts to attract greater investment.
Many SOEs who retain large state stakes have definitive advantages over other enterprises in the same industry but are performing more poorly than previously.
Besides, director of the Ministry of Finance’s corporate finance department, Dang Quyet Tien, said that the recent controversy over the equitisation of the Vietnam Feature Film Studio (VFS) has partly exposed the hidden corners in the equitisation of SOEs, from the criteria for selecting strategic shareholders and determining the value of intangible assets to determining land use rights in enterprise evaluation.
If the film studio is converted into apartments or supermarkets, it requires the authorities’ permission and the VFS’s value must be re-assessed.
In addition, Pham Duc Trung, director of the enterprises reform and development department of the Central Institute of Economic Management, said that the SOE equitisation process also fails to meet expectations in terms of attracting foreign and strategic investors.
The National Assembly’s resolution stipulates that the ratio of state ownership must be reduced as much as possible but this is not a straightforward task.
For example, an SOE which planned to reduce state ownership to 65 percent, proceeded with an initial public offering, yet state ownership remains high at 81 percent. The company also expected to sell 17 percent of its shares to strategic investors but only 10 percent were sold.
Post-equitisation, enterprises will find it hard to succeed if they still retain such amounts of state capital, while holding on to the old structure and outdated technologies.
Another hidden corner of the equitisation process is the use of land-related assets. According to Le Anh Duy at Saigon University, many SOEs were acquired by enterprises operating in different sectors such as the cases of the Vietnam Feature Film Studio, the Vietnam Motors Industry Corporation and the Vietnam National Vegetable, Fruit and Agricultural Product Corporation.
It is clear that investors are only interested in the benefits of SOEs’ land assets rather than enhancing corporate governance of SOEs after the equitisation process.
Vietnam equitised 632 SOEs in 2011 - 2017.
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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.
Echoing Thanh, Director of the Vietnam Institute of Economics Tran Dinh Thien stated that the progress of and number of equitised SOEs are basically guaranteed but the quality remains low.
Thien cited that among the 96.5 percent of equitised SOEs, only 8 percent of state capital is transferred to the private sector, which means the process has failed to move national resources from a less efficient sector to one which is more efficient.
With just 8 percent of state capital sold to the private sector, the state remains the dominant owner of these enterprises, while other sectors are still marginalized, thereby limiting the impacts of the process on corporate governance reform and efforts to attract greater investment.
Many SOEs who retain large state stakes have definitive advantages over other enterprises in the same industry but are performing more poorly than previously.
Besides, director of the Ministry of Finance’s corporate finance department, Dang Quyet Tien, said that the recent controversy over the equitisation of the Vietnam Feature Film Studio (VFS) has partly exposed the hidden corners in the equitisation of SOEs, from the criteria for selecting strategic shareholders and determining the value of intangible assets to determining land use rights in enterprise evaluation.
If the film studio is converted into apartments or supermarkets, it requires the authorities’ permission and the VFS’s value must be re-assessed.
In addition, Pham Duc Trung, director of the enterprises reform and development department of the Central Institute of Economic Management, said that the SOE equitisation process also fails to meet expectations in terms of attracting foreign and strategic investors.
The National Assembly’s resolution stipulates that the ratio of state ownership must be reduced as much as possible but this is not a straightforward task.
For example, an SOE which planned to reduce state ownership to 65 percent, proceeded with an initial public offering, yet state ownership remains high at 81 percent. The company also expected to sell 17 percent of its shares to strategic investors but only 10 percent were sold.
Post-equitisation, enterprises will find it hard to succeed if they still retain such amounts of state capital, while holding on to the old structure and outdated technologies.
Another hidden corner of the equitisation process is the use of land-related assets. According to Le Anh Duy at Saigon University, many SOEs were acquired by enterprises operating in different sectors such as the cases of the Vietnam Feature Film Studio, the Vietnam Motors Industry Corporation and the Vietnam National Vegetable, Fruit and Agricultural Product Corporation.
It is clear that investors are only interested in the benefits of SOEs’ land assets rather than enhancing corporate governance of SOEs after the equitisation process.
