Vietnam's SOEs equitization process falls far behind schedule
The lack of efforts from ministries and provinces is to blame for the delay, according to the Ministry of Finance (MoF).
In the first six months of 2018, equitization schemes of eight state owned enterprises (SOEs) were approved with a total value of VND29.37 trillion (US$1.29 billion), making the target of equitizing at least 85 SOEs by the end of this year a real challenge, according to the MoF.
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Under the equitization plan approved by Prime Minister Nguyen Xuan Phuc, at least 85 SOEs must complete the equitization process by the end of this year.
Moreover, only five out of 181 state owned enterprises (SOEs) subject to divestment completed the process, bringing the total number of enterprises that had divested to 16 during the 2017 - 2018 period. This resulted in returns of VND6.45 trillion (US$281.2 million) from divesting VND2.5 trillion (US$109 million) in book value.
The progress is far behind expectation set in the list of SOEs marked for divestment during 2017 - 2020 under the PM's Decision No.1232, targeting the divestment in 135 SOEs in 2017 and 181 in 2018.
The reason behind the delay, according to the MoF, is the lack of efforts from ministries and provinces. Additionally, problems in finance, land and laborers from periods prior to equitization also hindered the process at targeted SOEs.
In the remaining months of the year, the MoF recommended government agencies review a number of laws, including the Law on Enterprise, Law on Management and Utilization of State Capital invested in the Enterprise's Manufacturing and Business activities, Law on Cadres and Civil Servants, and Law on Bankruptcy, among others, with the aim of facilitating the equitization and divestment process.
The SOEs subject to divestment and equitization in the 2018 - 2020 period are urged to speed up the process and to seek the PM's support if necessary.
Positive results ahead
Nevertheless, Vietnam's effort to raise funds from the public-sector reforms is expected to triple in 2018 - 2020 compared to levels seen in the 2011 - 2017 period, according to Saigon Securities Inc (SSI), the largest brokerage house in the country.
Specifically, the total proceeds from initial public offerings (IPOs) and the share sales of SOEs in the next two years are expected to reach US$26.3 billion, 2.75 times higher than the funds raised for the whole period between 2011 and 2017.
Of the total, the value of IPOs will reach US$9.7 billion, while the total amount of divestment could hit US$16.6 billion.
"Vietnam could end up being the only country in the world that embarks on a new wave of SOE reform in 2018 - 2020, placing large and profitable SOEs on public offer," stated SSI.
With the establishment of the State Capital Management Committee in February, the government plans to make its SOEs more compliant with market principles and practices, according to SSI.
Accordingly, as many as 30 enterprises and economic groups will be transferred to the committee, which will manage the restructuring and sale of any public companies.
The divestment and equitization process of SOEs in 2017 contributed over VND144 trillion (US$6.34 billion) to the state budget, 2.41 times higher than the target set by the National Assembly, informed a 2017 report on utilizing state capital and assets at SOEs released on May 17. Among the most notable deals, the government sold a 53.6% stake in Sabeco for US$4.89 billion.
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