Is Vietnam too hasty in equitizing State-owned enterprises?

VietNamNet Bridge – Many SOEs have been put up for equitization recently, but experts have warned that “haste will make waste”.



Vietnam, equitization, SOEs

The government’s plan is to equitize 432 SOEs in 2014 and 2015.

However, to date, only one-fifth of the plan has been fulfilled. Though 115 SOEs were equitized in 2014, three to four times higher than that of three years before, analysts think the equitization plan will fail.

However, the government repeatedly shows its strong determination to pursue the equitization process. At least 317 SOEs need to be equitized in 2015.

In the latest news, Prime Minister Nguyen Tan Dung released an “ultimatum”, saying that the heads of the SOEs who cannot fulfill the task of putting enterprises into equitization will have to step down.

However, Dr. Tran Dinh Thien, head of the Vietnam Economics Research Institute, noted that the equitization will be meaningless if SOEs stay as state-owned enterprises after equitization.

Thien pointed out that some equitized enterprises sold only 10 percent of their capital. Vietnam Airlines Corporation, for example, has sold only 3-4 percent of its chartered capital.

“The State remains the biggest shareholder in the enterprises and it still holds the right to make decisions on all the issues related to the enterprises’ operation,” Thien explained when asked why the equitized enterprises remain state-owned enterprises.

The economist went on to say that it is not important to count the number of SOEs that have been equitized. It is more important to find out if the main purpose of the equitization can be achieved – transferring assets to the private economic sector and changing the ownership structure in businesses to pave the way for their development.

An analyst noted that Vietnam is impatient about slow equitization, trying every possible method to speed up the process.

He warned that if Vietnam goes too fast, it would be difficult to control, which is a high risk.

“It would be better for Vietnam to prepare well before implementing equitization,” he said. “If so, the state will be able to sell out the stakes at high prices.”

“Haste will make waste,” he said.

The analyst cited the failure of Vinamotor at its IPO (initial public offering) in March 2014 to show that a reasonable method will determine the success. At first, the state could sell only 3.1 percent of the total 51 percent of shares it offered, for which it earned VND15.7 billion.

After the failed capital withdrawal, the government recently announced the sale of all Vinamotor’s capital. The enterprise immediately found a buyer: a business has said it would pay trillions of dong to take over the motor production enterprise.

Pham Huyen

Vietnam, equitization, SOEs
 
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