9:46:13 PM | 2/16/2008
In 2007, restructured and privatised only 116 state-run enterprises, finishing just 21 per cent of the full-year plan of about 600 enterprises approved by the Prime Minister. It is not surprising that is often late in privatisation.
The progress of transforming state-owned enterprises into joint stock concerns in 2007 was very slow, especially the privatisation of economic corporations and groups. Under Decision 1729/QD-TTg dated
According to experts, the major reason for the slow privatisation of state-owned enterprises is the stock market. Both are involved in a vicious circle and waiting the green light from the other, privatisation is waiting the uptrend of the stock market and vice versa. The “movement” of privatisation and selling shares to public were active for half a year before March 2007. At that time, there was a worry that privatisation and massive share issuances were not properly controlled. Now the situation is opposite, when stock market doldrums coupled with the IPO results of Bao Viet, Phu My Fertilizer and even Vietcombank have discouraged many state-run enterprises from privatisation. The unexpected downtrend of the local stock market has led enterprises preparing for privatisation to hesitate. Some other businesses plan to delay their IPOs, such as Habeco. In related move, the state regulators have also asked some enterprises to reconsider the schedule for their IPOs on concerns of share oversupply on the market.
Another reason for the slow privatisation is the size of businesses. For example, the privatisation of farms, plantations and businesses in agriculture sector is difficult. According to the analysis of the Business Renovation Board under the Ministry of Agriculture and Rural Development, the privatisation of state-run agricultural enterprises is slow because most of them have limited capital and backward technology. The combined capital of 329 businesses and 17 corporations in agriculture sector is VND6,050 billion (US$378.125 million), or VND17.5 billion (US$1.1 million) each on average, and up to 15 per cent of them has capital lower than VND1 billion each. Businesses with limited capital mainly specialise in construction, fruit and vegetable, or tea, and state ownership in these corporations averages between VND100 billion and VND200 billion. On the contrary, some big corporations, such as Food Corp, Rubber Group, and Plantation Corp, have capital of up to several trillion dong. This is a big disparity among corporations, leading to the slow progress of privatisation.
This is the main reason the Ministry of Agriculture and Rural Development has been not able to finish the privatisation plan of the total 17 big corporations under the ministry and 329 affiliates. Currently, as many as 19 businesses and 11 corporations in agriculture sector can not carry out their privatisation.
Under the plan from now to 2010 and 2015, the government will continue speeding up the privatisation of state-owned enterprises, retaining only 400 operating in fields of national defence, security and some other areas. However, the current biggest obstacle is to specify and settle the public debts (mainly bank loans) of state-owned enterprises.
Leading the current list of “bad debts” of domestic banks is transport construction corporations under the Ministry of Transport. This business group has the biggest, longest and most difficult to settle bad debts. These bad debts focus mainly on state-run commercial banks, such Vietnam Industrial and Commercial Bank (Incombank), the Bank for Investment and Development of Vietnam (BIDV). So far, these corporations have bore total debts of estimated VND12,300 billion (US$768.75 million), mainly bad debts, which have been included in the black list of commercial banks.
In addition, construction corporations under various ministries, industries and localities also have huge bad debts. These businesses are estimated to hold total bad debts of up to VND2,000 billion.
Besides, other businesses operating in import-export, trading, services, civil construction, agricultural product processing, garment, supply of agricultural equipment, printing and package, and sugar cane in different localities also have huge debts. The total bad debts of these enterprises are estimated at up to VND2,500–VND3,000 billion.
It would be necessary to include another business group in the list of big debts. They are state-owned business monopolies, which have many advantages in site and fundamental conditions, such as sea ports, electricity, clean water, post and telecommunication, services, ship building, coal exploiting and processing, cement, iron and steel, beer and beverage, house building, oil and gas, railway and airway transport services. They still operate effectively and are major clients for loans provided by commercial banks. Although businesses in this field have not reported bad debts in commercial banks, their total outstanding loans are also huge, up to VND80,000–VND95,000 billion.
It would be understandable if privatisation slows in the final phase of the plan because the remaining businesses are mainly large ones and those in difficulty prior to privatisation.
The Deputy Minister of Agriculture and Rural Development Diep Kinh Tan said that the major difficulty of corporations is now the restructuring of parent companies; therefore, subsidiaries will also have to restructure themselves. Once the parent company is restructured, privatisation will go smoothly. "The Ministry of Agriculture and Rural Development decided that if any business is too weak, it will be dissolved in order to ease the burden on the parent company. In the short term, some tea companies have been dissolved. The dissolution will facilitate parent companies to mobilise all human resources and capital sources to strengthen the remaining subsidiaries,” affirmed Tan. Under the plan, the Ministry of Agriculture and Rural Development will privatise 11 remaining corporations right after the first quarter of 2008.
According to the Ministry of Finance, is in need of tough measures for its privatisation process. In 2008, the Prime Minister will consider the privatisation of state-run enterprises who have not sought the approval from state authorities. At the same time, the Ministry of Finance will be assigned to allocate the initial public offerings of privatised businesses. State-run corporations will be transformed into holding companies, and then they will be equitised in order to raise productivity, business capacity and financial capacity for SOEs. However, according to the Business Renovation and Development Board, it is necessary to amend the financial mechanism for corporations and holding companies, as regulations on supervising business financial health in the privatisation process are not strict enough.
By the end of December 2007, restructured and privatised more than 3,800 state-owned enterprises, over 70 per cent of total businesses and 25 per cent of state capital. Although the state has raked in capital from privatisation, the number of privatised businesses has created a large amount of commodities for the stock market, on official bourses Ho Chi Minh Stock Exchange and Hanoi Securities Trading Centre, as well as on the unofficial over-the-counter (OTC) market.
Lan Anh
Vietnamese
