According to the Ministry of Finance, competent state bodies ratified privatization plans of only eight SOEs in the first half of this year. Meanwhile, the government targeted to private 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 government considers 2018 a key year in the country’s restructuring plan of SOEs, targeting to privatize at least 85 SOEs in the year with 64 of which being large-sized.
According to Dang Quyet Tien, director general of the Ministry of Finance’s Department of Corporate Finance, the number of SOEs earmarked for privatization and divestment in 2018 account for over 50% and 46% of the total number planned for 2017-2020, respectively.
Vietnam privatized 632 SOEs in 2011-2017, with the total value of the state’s stake determined at VND374 trillion (US$16.45 billion). A number of typically successful cases included the privatization of dairy producer Vinamilk, beer and beverage producer Sabeco and Kim Lien Hotel.
Challenges ahead
Although the privatization of SOEs has been determined as a key policy to restructure the SOEs in particular and the whole economy in general, it has still encountered many obstacles, such as the influence of interest groups and 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 privatization 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 privatization 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 and cheap, for sure.
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.
Besides, SOE privatization has also remained less attractive to strategic investors due to the limitation on foreign ownership in a number of industries.
Director of the Vietnam Institute of Economics Tran Dinh Thien said that among the 96.5% of privatized SOEs, only 8% 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% 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.
Experts therefore 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.
The government targets to privatize at least 85 SOEs in 2018. Photo: VNA
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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 government considers 2018 a key year in the country’s restructuring plan of SOEs, targeting to privatize at least 85 SOEs in the year with 64 of which being large-sized.
According to Dang Quyet Tien, director general of the Ministry of Finance’s Department of Corporate Finance, the number of SOEs earmarked for privatization and divestment in 2018 account for over 50% and 46% of the total number planned for 2017-2020, respectively.
Vietnam privatized 632 SOEs in 2011-2017, with the total value of the state’s stake determined at VND374 trillion (US$16.45 billion). A number of typically successful cases included the privatization of dairy producer Vinamilk, beer and beverage producer Sabeco and Kim Lien Hotel.
Challenges ahead
Although the privatization of SOEs has been determined as a key policy to restructure the SOEs in particular and the whole economy in general, it has still encountered many obstacles, such as the influence of interest groups and 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 privatization 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 privatization 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 and cheap, for sure.
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.
Besides, SOE privatization has also remained less attractive to strategic investors due to the limitation on foreign ownership in a number of industries.
Director of the Vietnam Institute of Economics Tran Dinh Thien said that among the 96.5% of privatized SOEs, only 8% 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% 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.
Experts therefore 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.
