State-owned enterprise equitization process lags behind schedule

The deadlocked valuation of SOEs causes delays in the equitization process as a whole.

Le Manh Hung, vice head of the Enterprise Development Agency under the Ministry of Planning and Investment (MPI), attributed the sluggish pace of equitization to the fact that many localities have delayed the approval of land use schemes, particularly those presented by state-owned enterprises (SOEs).

Equitization related regulations have yet to thoroughly deal with problems relating to the valuation of SOEs, including the value of land plots and assets, thus causing delays in the process as a whole.

Additionally, many SOEs have not received a great deal of interest from investors during their equitization, especially those currently with a high ratio of State-owned capital. As a result, some have failed to meet expectations from their initial public offerings.

Dr. Pham The Anh, lecturer from the Hanoi-based National Economics University, said the restructuring and equitization of SOEs has emerged as an urgent need.

During 2018 as the process slowed down, only a few SOEs were successfully equitized. This resulted in a failure to meet targets set out in the overall plan.

In total, Vietnam had planned to have 85 SOEs equitized in 2018. Of these, 21 SOEs which had previously been scheduled for the 2017 scheme, were moved to the 2018 equitization list.

In fact, only 12 SOEs were equitized throughout 2018 and the equitization of the remaining firms was delayed until 2019 and beyond.

Anh suggested that the ratio of State - owned capital should be slashed to under 65% and even under 50% in order to become more attractive to private investors.

Private investors would be keen on making equity deals or investments at SOEs if they can gain a large enough stake and the subsequent right to make decisions related to company’s operations.

He has high hopes that the State Capital Management Committee, founded last year, is destined to eventually collect and manage state capital more efficiently and in a more transparent manner.

In a related move, Deputy Prime Minister Vuong Dinh Hue has recently asked the MPI to mull over the possibility of cutting the ratio of State capital to 36% or making complete divestment from State-owned public service entities after equitization.

A proposal in which the State will hold a stake of more than 36% or 50% at these entities will be submitted to the Prime Minister for approval.

Deputy PM Hue’s decision came after his review of proposals from the MPI and other relevant ministries on implementing the Prime Minister’s Decision No.31/2017/QD-TTg on restructuring State-owned public service entities into joint stock companies.