The equitisation of state-owned enterprises (SOE) is an important policy of the party and the government, aiming to mobilise social capital sources for production and business, as well as to build an active management mechanism to effectively use state capital and assets. However, many enterprises undervalue state assets with the aim of seeking private benefits. In order to clearly understand all aspects of the government’s equitisation policy, the Vietnam Business Forum interviewed Mr Dinh Van An, head of the Central Institute of Economic Research and Management (CIEM), on this issue.
In light of the government’s policy on preferential shares for leaders and employees working for the enterprises, many enterprises intentionally undervalue state assets to seek profits. What do you think about this?
It is not true that all enterprises intentionally lower the intrinsic value of state assets to seek gains, because it is quite difficult and complicated to assess the real value of a firm or a trademark. Especially, before going public, enterprises have to satisfy a number of requirements. In addition to such elements as brand, product quality and operational efficiency, each company needs to take into account other things like policies for redundant labourers and the non-existence of priority land leasing policies. These are possible reasons for the undervaluation of companies.
In addition, many people are willing to buy shares even before companies go public. Unsuccessful bidders think businesses intentionally lower the value to seek profit. In my opinion, this matter should be discussed from a purely objective angle.
In fact, several cases like the West Lake Shrimp Pastry Restaurant being valued at VND850 million, even cheaper than an normal apartment, and the Trang Tien Hotel, located on ‘Vietnam’s Wall Street’ being assigned a value of only VND4 billion, immediately sparked public suspicions. What do you think about these cases?
Recently, during a discussion about a decree on transference and trading of state-owned enterprises, a representative from a relevant unit reflected that, “Everyone thought the valuation of the West Lake Shrimp Pastry Restaurant was low. However, they didn’t realize that it has a small service area, no car park, and cannot be expanded. In fact, the restaurant fixed its value based on assets on the land, not the land itself, because it is under State ownership.”
Furthermore, considering the selling of State properties, the state also gives some conditions. For example, after selling, will the firm ensure benefits for its former labourers? For that reason, I think that before judging if a firm is expensive or cheap, people should carefully research all the relevant conditions.
The equitisation policy aims to help labourers become real owners of a firm. However, some individuals take advantage of the opportunity, acquire a large number of shares and control the firm. As a result, are labourers still suffering losses while state properties are inside the pockets of a few individuals?
To ensure labourers’ rights and interests after equitisation is the focus of the draft Decree on Equitisation, which will replace Decree 187. The key is to ensure real ownership to labourers who are able to maintain and develop the companies. This not only benefits labourers in particular, but also economic development in general.
The fact that some individuals take advantage of the policy, during equitisation, to hoard shares is another problem. It is necessary to determine whether the share purchase is legal or illegal, and if they take advantage of equitisation to gain profit from legal loopholes. This can happen when authorities are lax in management, or are involved in graft. Therefore, the equitisation process is heavily dependent on the competency level of cadres.
Giang Tu
Vietnamese
