Equitization faces many challenges

On November 14, to accelerate divestment, the Government issued Resolution 15 (on a number of solutions to promote, accelerate divestment, promote equitization, and reorganize and innovate state-owned enterprises) and was reflected in Decision 51 with a series of breakthrough solutions. However, in reality, there are still problems that need further guidance.

One of the important measures to implement equitization is to divest non-core investments in “sensitive” sectors. According to information at the conference to disseminate some new policies on divestment, sale of shares and registration of transactions and listing on the stock market held recently in Hanoi, the Ministry of Finance said that by the end of 2013, the total investment value of corporations and general companies in “sensitive” sectors was VND21,417 billion; of which the finance and banking sector alone was up to VND15,242 billion. In 2014, these enterprises had to divest VND3,568 billion (the finance and banking sector accounted for VND2,863 billion). The remaining value to be divested in 2015 according to the plan is VND16,367 billion.

EVN encountered many difficulties when divesting non-core investments from An Binh Bank.

However, the actual divestment of non-core investments is very slow compared to the planned target. At the recent Autumn Economic Forum 2014, Dr. Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM), said: By the end of July 2014, 7,139 billion VND had been divested, which is only 28.8% of the total investment capital that needs to be divested. The divestment also raises questions about its reality when the majority of the capital is transferred within the state sector and state-owned enterprises," Mr. Cung acknowledged.

"Promoting the equitization process of VINALINES On November 13, speaking at the signing ceremony of the Memorandum of Understanding on cooperation between Vietnam National Shipping Lines (VINALINES) and Hanoi Stock Exchange (HNX), Mr. Vu Bang, Chairman of the State Securities Commission (SSC) stated that the cooperation between VINALINES and HNX is considered to play a very important role in promoting the equitization process of the Ministry of Transport. Through equitization, VINALINES will attract capital, restructure the enterprise, improve the quality of its operations, and thereby participate more actively in the activities of the stock market.

Regarding the implementation of equitization, according to Mr. Vu Bang, Decision 51/2014/QD-TTg of the Prime Minister on divestment, sale of shares and registration of listing transactions on the stock market of State-owned enterprises (effective from November 1) has made many breakthroughs in reform in removing difficulties and promoting the process of equitization and divestment. Under the strong direction of the Ministry of Finance, in recent times, units of the State Securities Commission have coordinated with management agencies to strengthen propaganda and guide enterprises to specifically implement the above Decision."

According to Mr. Le Song Lai, Deputy General Director of the State Capital Investment Corporation (SCIC), the divestment of state capital in the banking sector is led by the State Bank, so the opportunity for SCIC to participate in buying back investments from corporations and general companies in this sector is very limited. Therefore, the capital that reaches SCIC is mostly investments with low business efficiency and is not really attractive to the market. Therefore, the representative of SCIC recommends that the State Bank provide guidance and create favorable conditions for SCIC to participate in buying back investment capital from corporations and general companies at commercial banks "instead of waiting for the State Bank to not accept ownership of capital, state-owned commercial banks to refuse to buy, then it is SCIC's turn".

Appreciating Decision 51 for creating a breakthrough in divestment (such as allowing the sale of shares below par value, below book value, which is currently a bottleneck...), Mr. Vu Duc Tien, General Director of Saigon - Hanoi Securities Company, said that there are still many points that Decision 51 has not mentioned or needs further clarification. For example, according to Decision 51, companies in which the State holds a controlling stake, from 51% or more, apply Decision 51 to divest investments. Thus, these enterprises can divest below par value, have accumulated losses... and divestment below par value, book value must ensure the principle that enterprises set aside sufficient provisions for investments according to current regulations.

However, in reality, for long-term financial investments, provisions must be made according to the equity method, not according to market prices. Therefore, for some listed or registered joint stock companies, the book value of the enterprise after deducting the provision for financial investment losses is still higher than the stock price on the market. Can the enterprise offer the stock at the transaction price on the transfer date? Another problem is that the regulation to reduce the price by 10% in case the offered shares are not sold out is low. "And in many cases we encounter, a one-time reduction of 10% does not solve any problem, there is still a blockage," said Mr. Tien.

According to Mr. Pham Quang Huy, General Director of the Petroleum Securities Company, the regulation that enterprises are not 100% state-owned can apply Decision 51 to divest capital. However, using the word "apply here" is very difficult for consulting units or state-owned enterprises because "if applied correctly, it is okay, but if applied incorrectly, it will be fatal and that is also what we are very afraid of". "Or like a company that has a loss in the most recent year or accumulated loss is not allowed to be auctioned to the public; the most recent financial report has an exception or the auditing company is not on the list of the State Securities Commission; the company is temporarily suspended... then how will the sale of that capital be handled?", Mr. Huy wondered.

Director of the Vietnam Economic Institute Tran Dinh Thien said that to promote divestment from non-core investments, SOEs need to have a clear and detailed plan for the divestment roadmap. The Ministry of Finance or the agency responsible for monitoring and synthesizing the progress of divestment should set up a website to publicly announce the divestment plan at SOEs. This will be the basis for people and investors to monitor and supervise, as well as proactively plan to participate in buying back capital.

According to News