Privatisation is a long-time task in Vietnam as it has launched since 1992 and has not completed. Objectively, new and flexible management is necessitated to speed up the privatisation process.
Old thought
There are many reasons, both subjective and objective, to refer to this sluggish equitisation process but the main and widely admitted reason is the improperness and impracticality of Vietnamese legal document system, leading to numerous difficulties for executive bodies. Specifically, in the current context of global economic crisis and fiercer competition on international and domestic markets, equitization is playing strategic roles in many key economic sectors in the country. According to many economic experts, the current main purpose of privatisation is to transform state-owned enterprises into multi-ownership businesses to facilitate state-owned enterprises to operate more effectively and avoid stagnation arising from the “give and take” attitude and behaviour inherited from the obsolete subsidy regime.
In fact, there are still many restraints to speed up this process, that is, the awareness, the mechanism and the legality (concretised in resolutions from the Party and the Politburo, etc). To date, though the SOE reform has been deployed for years, workers and leaders in many SOEs lack understanding of the process. In addition, this programme, with its nationwide scale, reportedly touches many management levels while even provincial authorities and policymakers lack sufficient knowledge of the policy, let alone their subordinates. Another cause is the internal conflict within one unit as history factors will leave a heavy burden on the enterprise: How the company will settle redundancy of employees following the privatisation and how the company will deal with weak workforce and poor-performing financials. Especially, at present, the State still holds a dominant authority in equitised enterprises, usually above 51 %, and their leaders are reluctant to change operations and methods of their company, leading to excessive workforce and ambiguous accounting system. This is also a cause to sluggish privatisation of State-owned enterprises.
As estimated, the process of equitisation has solved the operating efficiency problem of SOEs in many areas such as capital, revenue and profits. According to Mr Cao Dang Vinh from the Department of Civil Law under the Ministry of Justice, the slower the equitisation process is, the more competitiveness the companies are losing, which will lead to the loss of State assets.
Many wrongdoings in implementation
Many wrongdoings have been recorded during the process of privatisation. The Government Inspectorate has recently reported on the equitisation in the Electricity of Vietnam (EVN). To date, EVN has 65 member units, including 17 affiliated units, 5 non-productive units, 23 wholly EVN-owned companies, ten 50 % EVN-held companies and 10 associated companies. The inspectors have found out many violations in three equitised units, namely Pha Lai Thermal Power Joint Stock Company, Khanh Hoa Power Joint Stock Company and Dong Anh Electric Equipment Manufacturing Joint Stock Company. The total State equity value at the time of equitisation was VND3,352 billion and the payables to EVN was VND799 billion. The Government Inspectorate reported that consultants miscalculated corporate value and misapplied investment standards issued by the Economics Institute under the Ministry of Construction, leading to a decrease of these enterprises and causing a loss of VND4.5 billion in State equity value. Also according to the inspectors, Dong Anh Electric Equipment Manufacturing Joint Stock Company has not paid enough of nearly VND15 billion of the State capital to EVN while more than VND350 million, sourced from asset liquidation, has not been clearly defined.
In Hanoi alone, after going public, many companies committed wrongdoings during their privatisation process, including Dong A Trading Joint Stock Company, Thuy Ta Joint Stock Company under Hanoi Trade Corporation, Soc Son Trade and Service Investment Joint Stock Company, Hanoi Housing Investment and Development Joint Stock Company No. 22, Agriculture and Rural Development Investment and Construction Joint Stock Company, Hanoi Housing Investment and Development Joint Stock Company No. 2 under the Hanoi Housing and Urban Development Corporation, Hanoi Urban Investment and Development Joint Stock Company, Hanoi Investment and Construction Joint Stock Company No. 1 under the Hanoi Urban Investment and Development Corp, etc. Most violations in privatisation process are involved in procedures of transferring land use rights and valuing corporate asset ownership, financial shortcomings and outstanding assets and IPO results.
Large-scaled businesses will go public in 2010
According to the plan approved by the Prime Minister, in the 2007-2010, the country has to reshuffle 1,533 SOEs, including 950 enterprises to be equitised. The Government expects to keep only 700-800 SOEs in 2010. However, Vietnam managed to reorganise 271 out of more than 550 enterprises expected in 200. In 2008, only a fourth of a plan was fulfilled with 74 out of 262 enterprises restructured. In 2009 and 2010, as many as 750 enterprises need completed equitising. In the current context, this target will hardly be achieved.
Currently, the Ministry of Finance and the Central Committee for Enterprise Reform and Development, which were assigned by the Government to guide privatisation, also admitted that many hard-to-solve problematic difficulties arising from the implementation process, given the trademark valuation, the geographic location valuation and the valuation of land use rights among others. These problems will, if solved, will involve in many agencies and organizations; thus, the settlement needs time and proves poorly effective.
Recently, the Government has drastically guided concerned units to speed up the equitisation process in economic sectors of particular importance. Accordingly, the Government requires the Vietnam Airlines Corporation to convert into a one-member limited liability company if it is not completed equitisation before July 1, 2010. The Prime Minister has agreed with the privatisation plan to be applied in 2009-2010 to three enterprises wholly owned by Vietnam Airlines, including Noi Bai International Airport Ground Services (NIAGS), Da Nang International Airport Ground Services (DIAGS) and Tan Son Nhat International Airport Ground Services (TIAGS) In addition, according to the directive from the Prime Minister, in the first quarter of 2010, Vietnam Airlines must report on the establishment of a joint-stock airline company called VietAir, the restructure of Vietnam Air Service Company (Vasco) and the reorganisation of Aviation Science Institute.
Mr Bui Xuan Khu, Deputy Minister of Industry and Trade, said that the Prime Minister has also agreed to the plan to reshuffle and privatise wholly State-owned enterprises administered by the Ministry of Industry and Trade from 2009 to 2010. Amongst 12 enterprises to be equitized included three corporations, namely Viet Nam Electrical Equipment Corporation, Vietnam Industrial Construction Corporation and National Company for Vegetable Oils, Aromas and Cosmetics of Vietnam, nine companies, namely Electrical Mechanical Appliances and Technology Development Company, Vietnam National Foreign Trade Forwarding and Warehousing Corporation, Electric Appliances - Bicycle Motorbike Company, Vietnam National Complete Equipment and Techniques Import - Export Corporation, the Construction, Assembly and Building Materials Company V, Trade Promotion and Tourist Company, Building Material and Construction Company, Agricultural Products Company II and Vietnam Forest Products and Building Materials Company.
To achieve the equitisation objectives, the Government has also passed the Resolutions 06/NQ-CP requiring the Ministry of Finance to coordinate with the Steering Committee for Enterprise Reform and Development to seek solutions to deal with difficulties to speed up the restructuring and equitisation of State-owned enterprises, economic groups and large-scaled enterprises solidly and effectively.
Hopefully, with the measures aforementioned, obstacles on the process of SOE equitisation will be reduced and the economy of Vietnam will positively progress in the near future.
Anh Phuong
Vietnamese
