Accelerating equitization of state-owned enterprises to reach the finish line

Restructuring state-owned enterprises is identified as one of the three main pillars of economic restructuring to create comprehensive innovation from organizational models, management methods, business investment strategies... to capital restructuring.

To complete the equitization of 432 state-owned enterprises from now until 2015 as required by the Government, perfecting institutions and mechanisms is one of the prerequisite tasks to help enterprises accelerate to achieve this goal.

Decentralization, responsibility definition

Deputy Head of the Steering Committee for Enterprise Innovation and Development Pham Viet Muon said that since Decree No. 99/2012/ND-CP on the assignment and decentralization of the implementation of rights, obligations and responsibilities of state owners towards state-owned enterprises and state capital invested in enterprises was issued, it has helped to more clearly define the rights, responsibilities and obligations of the Government, ministries, branches, localities, and boards of members of economic groups and state-owned corporations.

The sector management ministry is the focal agency implementing the rights, responsibilities and obligations of the state owner towards state-owned enterprises, especially towards state-owned corporations and general companies, and is also the agency responsible for monitoring, inspecting and evaluating the results and performance of enterprises.

Illustration photo: VNA

Reports from 13 ministries, 34 localities and 6 economic groups show that the implementation of state ownership management has initially shown its effectiveness. The functions of inspection, supervision and evaluation of the performance of owners of state-owned enterprises have been given more attention. The rights, obligations and responsibilities of owners were focused on in 2013 mainly in equitization, divestment, transfer of ownership representation rights to the State Capital Investment Corporation (SCIC); supplementing charter capital, amending and supplementing the Charter of organization and operation; deciding on personnel, inspection, examination and supervision of state-owned enterprises.

In fact, the formation and consolidation of the organization and operation of SCIC over the past time has also brought many important experiences in innovating the method of state capital management in enterprises, thereby moving towards eliminating administrative intervention of state agencies in production and business activities, contributing to innovating the method of state capital management in enterprises from administrative form to capital business.

Improve business efficiency

From 2011 to 2013, the whole country has restructured and equitized 180 enterprises, reducing the number of 100% state-owned enterprises to 949 units (not including state-owned farms and forestry farms), including 19 state corporations and 21 enterprises with state capital of over 100 billion VND. Most of these enterprises are large-scale, have a wide scope of operations, and operate in multiple sectors such as the Bank for Foreign Trade of Vietnam, the Bank for Investment and Development of Vietnam, the Gas Corporation, the Vietnam National Petroleum Corporation, the Vietnam Steel Corporation, the Viglacera Corporation, etc.

Through equitization, state-owned enterprises are reorganized in an important step, basically focusing on key and important industries, fields and areas that the State needs to hold. Although state-owned enterprises have decreased in number, they have become stronger in many important industries and fields with increased capital.

According to the assessment of the Steering Committee for Enterprise Innovation and Development, most state-owned enterprises after equitization have had a good growth rate and operate more effectively. The establishment of joint stock companies continues to increase competitiveness in the economy, promoting restructuring of the stock market. Along with reviewing business lines, many enterprises have proactively developed long-term plans, development strategies for 2015-2020 and financial plans for implementation.

State corporations and groups have reorganized production and business, restructured member enterprises in the direction of specialization, division of labor, cooperation, not spreading out, avoiding internal competition; merging and consolidating members doing business in the same industry.

Implementing financial restructuring, many economic groups and State-owned corporations have improved their financial capacity and increased their charter capital, such as Vietnam Electricity Group increasing its charter capital from VND 76,700 billion to VND 143,000 billion; Vietnam National Coal-Mineral Industries Group increasing from VND 14,794 billion to VND 35,000 billion; Chemical Group doubling its capital from VND 8,000 billion to VND 16,000 billion... At the same time, divestment of capital invested outside the industry and business sector has also received more attention with the total divestment capital reaching VND 4,164 billion out of the total VND 21,797 billion, equivalent to 19%.

In the context of economic difficulties, the group of state-owned enterprises, focusing on economic groups and state-owned corporations, still achieved a fairly good growth rate.

State capital invested in enterprises continues to be preserved and developed. In 2013, 18 groups and corporations with state capital of up to VND840,000 billion (accounting for 83% of state capital in enterprises) alone achieved a total revenue of VND1,184 trillion, contributing VND191,000 billion to the budget. Of these, 17/18 units operated profitably, with a return on equity of 16.19%. Despite being in the process of restructuring and reorganizing the apparatus, the state-owned enterprise sector still maintained the highest contribution to the state budget among the three economic sectors, over 30%.

However, the efficiency of enterprises is still considered not commensurate with the resources held, and competitiveness is low. Therefore, although state capital has increased sharply, revenue, profit, budget payment and profit margin on capital have not increased correspondingly. Therefore, improving enterprise efficiency continues to be a heavy task along with achieving the goal of completing the equitization of 432 state-owned enterprises from now until the end of 2015.

Radical solution

According to the project of reorganizing and innovating state-owned enterprises in the period of 2011-2015 of ministries, branches, localities, economic groups, and state-owned corporations approved by the Government, by 2015, 531 enterprises will be equitized, 25 enterprises will be merged and consolidated; 16 enterprises will be dissolved or bankrupted, and 10 enterprises will be transferred or sold. However, the results of equitization in the past 3 years have been low (99 enterprises), so from now until the end of 2015, the whole country will have to complete the equitization of the remaining 432 enterprises.

To complete this plan, the Ministry of Planning and Investment believes that there needs to be determination and unity from the central to local levels to ensure the progress of the approved state-owned enterprise restructuring plans. At the same time, the implementation solutions must also be very drastic.

To "offer advice" to further accelerate the equitization process, Vice Chairman of Ho Chi Minh City People's Committee Le Manh Ha boldly proposed that the Prime Minister approve a list of enterprises that will not be equitized.

According to Mr. Ha, equitization is natural, so if any enterprise wants to not equitize, it must prove the reason and ask for permission. Ho Chi Minh City also proactively proposed to allow some public utility enterprises that are not subject to equitization in the 2014-2015 period to carry out equitization early, especially units in the field of environmental sanitation in districts because in reality, non-state enterprises are better able to do this.

Along with the core task of equitization, the divestment of non-core investments and state capital in areas where it is not necessary to hold controlling shares will also be seriously implemented. The divestment of non-core investments is not only to cut or reduce losses but also to use market mechanisms to reallocate resources and improve capital efficiency. However, there are still many concerns about the deadline for completing divestment in 2015 with many reasons given.

According to Mr. Tran Ngoc Thuan - General Director of Vietnam Rubber Industry Group, the stock market is still not "warm" while projects need to have a suitable divestment roadmap to avoid losing State assets. Some projects that are non-core investments such as hydropower, but are in the unfinished investment phase and cannot be completed in 2015, are being proposed by the Government to be allowed to complete investment before implementing divestment according to regulations.

If a business invests effectively outside its core business, is it necessary to divest capital? This is also a concern of many businesses and managers. Currently, the portfolios that need to be divested due to investments not in the main business lines of many corporations and general companies have quite a lot of cross-investments between businesses due to the policy of using each other's goods and services. Therefore, there needs to be a mechanism to divest capital from the above investments to ensure efficiency and speed for businesses, even allowing divestment according to agreement or book value, Mr. Thuan proposed.

According to Dr. Tran Van - Deputy Chairman of the National Assembly's Finance and Budget Committee, the restructuring of state-owned enterprises will reduce the proportion of direct participation of the State in production and business to attract financial resources from the private sector to invest in enterprises, and strengthen corporate governance. Meanwhile, it is still necessary to ensure social stability and control the market price situation, and increase the direct influence of the State on industries and fields that are "sensitive" to the people.

In restructuring state-owned enterprises, it is necessary to pay attention to the influence of "interest groups" on decisions on equitization, sale, assignment, transfer, dissolution, and bankruptcy of state-owned enterprises. Although sometimes decisions may not be completely comprehensive, they still take advantage of opportunities and favorable times for preserving and divesting state capital.

According to Vietnam+