Spotlight on state firms getting back to basics

State-owned firms and groups’ divestment from non-core businesses has grabbed the public’s special attention. Are such moves appropriate?

Requiring state-owned firms to divest from non-traditional businesses to focus on their core tasks is a necessity which should be done a long time ago. First and foremost, it is crucial to make clear core functions and tasks of state groups and corporations. If these firms are operating in areas not attractive to private equity investors, the appraisal criteria should be different but not just based on profits. When state firms’ major duties are apparent, the next focus will be their resources, including capital sources.

As far as we know, to restructure Vinashin the state had set up a steering committee led by Deputy Prime Minister Vu Van Ninh. Therefore, rearranging a whole system of state-owned enterprises needs the establishment of a specialised body, at least a steering committee as in Vinashin case.

In brief, I welcome the idea of state firms divesting from non-core businesses, but this should follow a concrete trajectory with clear steps.

In fact, investment into non-core businesses has contributed a great deal to enterprises’ profits. Will state groups’ divestment lead to possible collapses?

As I said above, clarifying state firms and groups’ core functions is of great importance. If they handle financial operations, how could they withstand if they were stopped from investing in outside areas. If they pursue economic or political targets, their existing payroll, bonus and other relevant mechanisms should be revised.

Massive state capital divestment could dampen the market and cause losses to state coffers. Is that the case?

That is right. In our current stock exchanges the price of many stocks fell under their par value, therefore state capital divestment decisions must be carefully weighed up. If the state divested massively it would be impossible for the market to absorb this colossal capital amount.
A clear trajectory is a must for state capital divestiture. We should not do this in haste just due to public pressure.

What should state groups focus on first when it comes to capital divestment?

We had better give attention towards key sectors and business groups such as the Vietnam National Posts and Telecommunications Group, the Rubber Industry Group or the Vietnam National Coal-Mineral Industries Group.

The spotlight should be put on making clear their tasks and functions and requiring them to present the sector’s development strategies. Relevant policies and mechanisms should also be altered. Core functions of state firms, in my view, are to address market blemishes but not only run after profits.