Boosting SOE equitisation efficiency

Nguyen Anh Dung, chairman of Vietnam National Chemical Group (Vinachem) and cum member of the NA Economic Committee, shares his views on ways to bolster the efficiency of state-owned enterprises’ equitisation process.

Diverse assessments insisted on a positive outcome of SOE equitisation in the past years. As an actor directly involved in the process, what is your assessment?

As many as 558 SOEs were restructured during 2011-2015, of which 478 units were equitised, reaching 95 per cent of the projection.

Generally, the policies and mechanisms on equitisation and business restructuring have been constantly ameliorated with a view to bettering the quality of equitisation and avoiding damage to state capital and assets. The next step would be setting up a sufficient and conductive legal environment which supports implementation.

In my view, equitisation and business restructuring has gradually changed the way of thinking and management methods at businesses, helping to improve publicity, transparency, and businesses’ sense of self-reliance, while at the same time enhancing the supervisory role of the state and the society over business operations. This helps bolster firms’ competitiveness.

Equitisation and capital divestment at several SOEs, however, failed to meet their progress targets, resulting in a low equitised capital ratio plus a slow application of modern corporate governance methods.

About 95 per cent of equitised firms have turned into joint stock companies. Does this signify success in equitising SOEs?

Only looking on the number of equitised firms, one may think that the set target has basically been achieved.

However, as a matter of fact, the state still holds a controlling stake in most of the equitised SOEs, currently dubbed as joint stock companies. Therefore, by essence, they remain state businesses. In light of the Trans-Pacific Partnership Agreement (TPP), businesses where the state retains over 51 per cent of the chartered capital are still considered state businesses. Based on this requirement, not many equitised SOEs jump the bar.

At businesses with the state holding beyond 51 per cent, as a ruling stockholder the state still plays a decisive role in all company activities, from investment, production, and business planning to members in the management board. Therefore, we need to have a fair assessment about the outcomes of equitisation.

How to bolster the efficiency of SOE equitisation, then?

I used to take part in a NA Economic Committee workgroup that left for Poland to learn from their experiences in privatising SOEs. The ‘architect’ on restructuring Polish SOEs had advised Vietnam to exercise caution in the process. Massively turning SOEs into private firms through equitisation and capital divestment, without strict control, may lead to a slew of state assets falling into the hands of some individuals illegally, as was the case in Poland. When capital losses were detected, the situation turned out to be irrecoverable.

From the lessons in equitising SOEs in Poland and other countries in Eastern Europe, I suggest that in the upcoming time it is important to keep up capital divestment and the pace of equitisiation, but not massively to avoid creating pressure on government agencies, localities, and related businesses.

We may set out the ratio of how many percentage of state capital in the total state-owned capital volume to be equitised. From there, ministries, sectors, localities, and related state groups and corporations will first select profitably-running units to sell their stake at the market price. Other businesses will take further restructuring steps, and embark on capital divestment or equitisation when conditions allow.