Step-by-step SOE divestment

November 20, 2011 | 09:09
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Divesting from non-core businesses should not be taken on an extensive scale, but aim at state-owned enterprises (SOEs) active in areas in which the state holds a monopoly.

National Assembly Finance and Budget Committee senior expert and Vicem deputy general director Nguyen Huu Quang tells VIR why.

Why should SOEs active in state monopolised areas be targeted only?

State firms’ investment into non-core areas should be handled with discretion. In principle, businesses can pump money in any areas with profitability. They later use the returns yielded from these ventures to feed their core businesses.

However, those SOEs providing state monopolised services should be bared from non-core investment as their core tasks is helping to achieve national supply-demand balance in their areas and benefit from state special mechanisms.

Is it a wise decision to force SOEs divest from non-core businesses by all means?

Divestment is a government commitment. Reality shows that in some occasions divestiture is the right move that must be shortly taken as the longer the delay the bigger losses it could bring.
Divestiture decisions should not be made in haste especially when these non-core businesses envisage a healthy future prospect.

Therefore, setting proper time for divestiture is of great importance to optimise state capital usage efficiency. In my view, SOEs’ management board should decide on divestment plans.

Is it necessary to cap SOEs’ investment into banking, insurance and securities trading fields at no more than 10 per cent of recipient companies’ chartered capital?

The state should invest in areas in which people and businesses from other economic sectors do not want to jump in and should not pump money into fields benefiting from diverse social development resources. Besides, the state should not hold ruling stakes in areas not requiring state monopoly. Similarly, firms active in state monopolised fields should not stretch to outside areas.

You are state cement conglomerate deputy chief, what is you comment on the cement sector’s outside investment efficiency?

Cement is not a product subject to a state monopoly and Vicem just accounts for 35 per cent of the country’s cement market share. Therefore, the sector’s non-core investment will not largely impact on the country’s cement supply and demand balance.

By Thuy Lien

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