Restructuring is top of the pops

Government Office deputy chairman and deputy head of the National Steering Committee for Enterprise Reform and Development Pham Viet Muon sheds some light on SOE restructuring.

Could you review 10 years implementation of state-owned enterprises (SOEs) realignment?

In essence, restructuring is a long-lasting process. In the past decade, the SOE sector has undergone radical changes. SOE operations concentrate in areas demanding state to hold ruling stake.

Some big SOEs came into existence and become mainstays of the SOE sector as well as the economy. Operation efficiency and competitiveness of SOEs also significantly ameliorate when in 2001 up to 60 per cent of SOEs counted losses, this figure dropped to just 20 per cent in 2010.

However, a number of shortcomings still got exposure. For instance, state should not put its capital into scores of firms out of 1,309 on-going SOEs. In fact, state capital portion is less than VND5 billion ($238,000) in 102 SOEs and that is less than VND1 billion ($47,000) in other eight SOEs.

Hence, SOEs will be realigned to be able to play central role in the economy. To that effect, rearranging state groups and corporations will link closely to the process of restructuring the country’s economy.

Will the state economic group’s role be changed during restructuring process?

In the past decade, state groups carried multi-field operations parallel to their core businesses. Reality shows that by 2007-2008 many groups founded their subsidiaries for business expansion to the level beyond state control.

During restructuring process in the coming period, state groups should do their core tasks only, the relevant fields must aim to serve their core tasks. For instance, Electricity of Vietnam (EVN) shall only trade and not get involved in other sectors like telecommunications.

Will there be massive capital divestitures to achieve the goal?

To ensure we are in a position to obtain set targets capital divestiture will bring some new points.
In the past, divestiture means selling capital. There will be some revisions in the way capital will be divested in the coming period. Transfer of capital or whole SOEs from one business entity to another will be green-lighted.

Merging EVN Telecom into military-run telecom group Viettel reflects that new concept in capital divestment. If EVN Telecom is equitised, EVN still holds its 50 per cent stake, in doing that the state will not achieve its goal of divesting capital from non-core businesses to concentrate into core areas.

Equitised firms, in which the state does not need to hold ruling stakes, are also green-lighted for capital divestment under the principle that reducing state capital in fields and areas in which the state does not need to take control.

Capital divestment also depends on market conditions. Tough market conditions made IPO plans of scores of firms dropped. In addition, SOEs will be restructured based on operational fields and areas irrespective of their management authorities.