SOE equitisation still at a snail’s pace

Hanoi is yet to approve any equitising plans of seven Hanoi businesses in the list of 93 businesses to be equitised in 2012 aired by the Ministry of Finance in June, according to a Government Office source.

In fact, when the list of 93 firms to be equitised in 2012 was declared, concerns over their progress were voiced rooted in the fact that only six businesses wrapped up their equitisation plans in 2011 and the first five months of 2012.

Vietnam National Textile Garment Group is likely to drop its target to finalise its equitisation in 2012 despite its early preparations and the leadership’s strong commitment, according to a Ministry of Industry and Trade representative.

A sliding stock market, worsening economy and investors’ finite financial sources were key reasons behind firms’ delayed equitisation path.

However, looking back on enterprises’ equitisation process in the past five years it is apparent that delay has seemingly becoming a ‘chronic disease’.

For instance, during 2007-2010 only 30 per cent out of 900 businesses bound to be equitised reached their targets. One should remember that the stock market was still in good shape in 2007.

Besides, firms with over 51 per cent state capital ratio still held a large proportion among equitised firms.

Experts involving in the draft project on furthering enterprises reforms to boost operational efficiency which was presided by the Ministry of Planning and Investment pointed out that the efforts to restructure businesses in key sectors and areas have reported limited results.

Of 1,039 enterprises with 100 per cent state capital 29 per cent of them operate in agriculture-forestry-fisheries areas, 19 per cent engage in industrial production, 10 per cent in transport, 9 per cent in construction and up to 36 per cent work in trade, services and tourism areas which are believed do not need to raise state capital.

Since a big share of state capital was put in trading areas, it was impossible to say delay in equitising enterprises in the past mainly stemmed from market difficulties.

The experts, however, attributed the delay to problems relevant to policies and mechansism on enterprises equitisation.

Irrespective of high bad debt rates at existing enterprises which hinder firms’ equitising schemes, current mechanism on setting enterprise value, particularly their stock starting price is impractical as the price is often much higher than their actual value, putting firms and relevant state management bodies in a fix as they fear of causing losses to state coffers in the face of sliding stock market.

Second, guiding regulations to define land use rights, setting advantage values and sourcing strategic partners are not in place, making investors to turn to different state bodies for permission, then delaying the process.

Third, cumbersome operations of some state groups and corporations is a problem. There are cases state groups and corporations are bound to equitise, but some of their member companies operate in areas the state needs to take ruling.

“Mechanism-related impediments need to be soon tacked on the basis of ensuring transparency and protecting national interests to facilitate the process,” said head of Vietnam Institute of Economics Dr. Tran Dinh Thien.