SOEs efficiency remains low: Prime Minister

PM Phuc addresses the conference on renovating and improving the efficiency of the State owned enterprises (SOEs) operation held on Wednesday in Ha Noi. Photo baochinhphu.vn

PM Phuc made the statement at the conference on renovating and improving the efficiency of the State owned enterprises (SOEs) held on Wednesday in Hanoi.

“Better corporate governance and the emphasis on the investment in science and technology will help SOEs thrive, raising the efficiency of the use of investment capital enhancing its business efficiency and contributing better to the national economy development,” the PM said.

The Government has set up a special committee that acts as the ownership representative of State capital at wholly State-owned enterprises.

According to the PM, the committee focuses on two key long term tasks, which are bolstering the equitisation and divestment of State capital and improving the capacity and efficiency of State-owned enterprises, especially large-cap corporations.

“But they must not cause difficulties and bottlenecks for SOEs’ production and business. These committees need to help firms grow, not to slow them down,” PM Phuc said.

However, he added that many SOEs had been holding large amounts of assets but their production, business efficiency and contributions to the State budget were low. A number of projects had suffered big losses. Equitisation and divestment from SOEs had not reached the Government’s targets.

The main reason was a number of business leaders were unwilling to change, avoiding responsibility or worrying about loss if the business model changes. Problems related to land, asset valuation, institutional inefficiencies, regulations, obstacles in handling labour arrangements and propaganda had not been solved effectively, he said

Equitisation and divestment were key tasks for restructuring State-owned enterprises (SOEs), Phuc said, adding that the privatisation process must follow the principles of publicity and transparency.

He stressed that due attention must be given to the fight against vested interests and corruption in every phase of the process, concrete measures must be chalked out to prevent corruption, losses and waste.

“Even profitable SOEs with promising business performance must be privatised to attract social capital resources. Equitisation must be associated with listing on the stock market because loses and corruption easily incur during this process,” the PM said.

Addressing the conference, Deputy Prime Minister Vuong Dinh Hue said SOEs should put emphasis on key areas such as national defense, security and essential sectors that private sectors do not get involved in, and urgently divest capital from the other areas among which SOEs are performing effectively.

Regarding capital management at enterprises, especially post-equitisation period, Hue insisted on the determination of the extent and scope of the State holding in each specific field or enterprise, the rights and responsibilities of organisations and individuals representing State capital in enterprises.

According to Nguyen Dinh Cung, Director of the Central Institute for Economic Management, SOEs are focusing on equitisation and divestment but not paying adequate attention to corporate management adjustment and improvement as well as market adaptation.

Regarding equitisation, Cung suggests focusing on quality rather than on quantity, restructuring shareholder portfolio towards more effective orientation.

Chairman of State Capital Investment Corporation (SCIC) Nguyen Duc Chi urged ministries and sectors to quickly provide guidance on the implementation of the Government’s guidelines, avoid losing business opportunities.

“For example, the Government issued Decree No.32/2018/ND-CP stating that enterprise value includes the historical, culture and trademark value of the enterprise. If specific guidance on the valuation is soon public, equitisation can soon be implemented as enterprise valuation helps firms determine the shares put up for auction,” Chi said.

More than 660 SOEs equitised but yet listed

As many as 667 equitised SOEs, including many big names, have yet to list their shares on the stock exchanges so far, said Minister of Finance Dinh Tien Dung during the conference.

Among 295 SOEs managed by ministries yet to do so, the Vietnam Northern Food Corporation (Vinafood1) has the largest number of equitised but unlisted subsidiaries, 18, including Ha Son Binh Food Company, Vinafood1 Flour Mill Company, VNF1 Distribution – Retail JSC, and Thanh Hoa Food JSC, Dung said.

It was followed by the Viet Nam National Textile and Garment Group (Vinatex) which has 14 subsidiaries of such type, including Chien Thang Garment JSC, Vinatex – Tan Tao Investment Corporation and Viet Nam Wool JSC.A number of others are owned by State-run giants like the Viet Nam National Petroleum (Petrolimex), Viet Nam Electricity (EVN), Vietnam Oil and Gas Group (PVN), Viet Nam National Chemical Group (Vinachem), and Viet Nam Railways.

These firms mainly blamed the delay in going public on challenges in pushing for organisational and operational restructuring, or not meeting the listing requirements in terms of the number of shareholders or charter capital.

The Ministry of Finance also named 372 unlisted SOEs managed by cities and provinces. Among the concerned localities, HCM City leads the way with 11 corporations and groups with hundreds of subsidiaries that have been equitised but not listed.

According to the ministry, this situation has negative impacts on not only the stock market’s openness and transparency but also the SOEs themselves as these firms have moved relatively slow in post-equitisation corporate management restructuring to reach the standards of those that went public.

Directive 04/CT-TTg issued by the Prime Minister on the restructuring and renovation of SOEs in 2016-2020 requires the SOEs to list their shares on the stock exchanges within a year after their initial public offerings (IPOs).

In August, Deputy Prime Minister Vuong Dinh Hue again asked the Ministry of Finance and the Government Office to publicise the list of the SOEs failing to do so in time on the websites of the ministry and the government. It was the third time the list of these SOEs has been ordered to open to the public, after the first in April, 2017 and the second four months later.