Government again affirms equitisation plans

Speaking at the Vietnam Business Forum last week, Deputy Prime Minister Hoang Trung Hai said the Prime Minister had approved a plan to lower the number of state owned enterprises (SOEs) from 1,200 to 600 by 2015.

"The equitisation progress of SOEs has been slow of late due to the negative effects of the economic crisis. However, the government will speed up the process in the near future," Hai confirmed.

In 2012, only 134 SOEs were equitised, while so far in 2013 nearly 100 underwent the process, well short of the annual target of 175.

Deputy Minister of Finance Vu Thi Mai added that the ministry was drafting a series of new legal documents for immediate release which would speed up the transition.

Among the MoF’s changes is a draft Law on State Capital Usage and Management which is expected to be submitted to the National Assembly in 2014. The new draft law will introduce regulations on the management of state investment in businesses and provide guidelines for the supervision of state capital and management.

The ministry is also finishing regulations on the management of SOEs as well as SOE debt management.

In addition, the MoF has just released Decree 189 /2013/ND-CP replacing Decree 59/2011/ND-CP on the conversion of enterprises with 100 per cent state owned capital into shareholding companies, which should ease the equitisation progress.

As a further measure, the MoF is mulling over selling state stakes below their par value, in order to address issues associated with capital withdrawal of state groups and corporations.

However, the Vietnam Business Forum’s Capital Market Working Group, suggested in a recent report that while state coffers remain incapable of meeting the demand for public spending and investment, the state should strongly consider controlled privatisation instead of increasing the state budget over-expenditure cap.

The gross capitalised value of the public shareholding in 11 companies among the 20 largest listed companies on the Ho Chi Minh City Stock Exchange currently stands at around $14.8 billion, or 38 per cent of the value of the entire Ho Chi Minh City Stock Exchange.

"Shareholdings that exceed 50 per cent in these 11 companies are worth $4.4 billion alone. Selling parts of these companies will easily compensate for the state budget deficit in the current difficult time, instead of cutting the minimum wage or resorting to other extreme measures," said Terry Mahony, representative of the group.

The group recommended increasing foreign equity and cutting public shareholding by selling public equity in non-sensitive joint stock companies.

"A first step may be cutting public equity in listed companies to between 35 per cent and 50 per cent. The rate can be further reduced at a later stage," said the group.

The working group added that the equitisation process for wholly SOEs should be accelerated and the list of sensitive lines of business should be reviewed and trimmed down.