Enhance Equitised Enterprises' Management Skills and Financial Accessibility

There were 150 Vietnamese entrepreneurs attending the Workshop on enhancing management skills and financial accessibility of equitised enterprises held by VCCI in coordination with Golden Bridge Corporation (Korea) on February 27, 2006 in Hanoi.

 

This workshop is the start of a series of assistance activities to equitised firms to be carried out by VCCI and Golden Bridge in 2006 including training courses on business management, issuing and listing of shares, supplying information about foreign investors and investment consulting, etc. At the workshop, VCCI signed with Golden Bridge an agreement on boosting information exchange and cooperation between Vietnamese businesses and this Korean leading financial investment corporation.

 

Mr. Vu Tien Loc, President of VCCI said the equitisation process in Vietnam has been promoted, particularly in 2005, and a series of innovated policies on equitisation have been applied. Reports by equitised enterprises after one-year of operation showed that most of them obtained high growth in their economic figures, of which workers’ income increased by 22 per cent and average revenue, profit, contribution to State budget, and quantity of employment increased 1.4 times, 2 times, 1.2 times, and 5.1 times, respectively. Financial results of post-equitisation enterprises appear to be better.

 

However, those are primary successes after their one-year operation under a new form. In reality, such firms face many issues including their internal management, the State’s macro management, evaluating and redefining their development strategies after equitisation, settling and restructuring unpaid debts, attracting foreign investments, financial management and finding access to financial markets.

 

A survey by VCCI showed that entrepreneurs always put business capital on top priority and credit is now the greatest obstacle to their businesses’ growth. The next are fierce competition, limited capacity and shortage of production sites, Loc added.

 

The survey also said that short-term bank loans that have been overcharged appear to be the unique and traditional way of access to investment capital of Vietnamese enterprises. Mobilising capital through the stock market is still a new game, which the majority of them are not familiar with and they not well equipped to use such a great potential form of capital mobilisation. 

 

Mr Nguyen Duc Tang, Deputy Director of the Corporate Finance Department, the Ministry of Finance (MoF), said that currently, capital of equitised enterprises has not yet developed. Bank loans still account for a large portion of their capital and they have not taken the initiative in mobilising capital.

According to statistics, 90 per cent of effectively run equitised firms who are exempt from business income tax should reserve a certain portion for capital accumulation, Tang said. Currently, enterprises mainly use this sum of money to pay to their stakeholders as returns on equity. Moreover, firms have not paid due attention to issuing stocks and bonds to increase their legal capital, the benefit of which has escaped many.

 

Mr Vu Tien Loc held that access to international financial markets by issuing bonds and stocks not only helps businesses solve their existing problems but are also a form of integration, enhancing their competitiveness.

 

According to Mr Lee Sang Joon, President of the Golden Bridge Corp, General Director of Bridge stock company (Korea), however, Vietnam now has only 44 enterprises and institutions listing their shares, most of which are small and medium enterprises (only six firms have a total value of issued stocks of over VND800 billion).

 

The total value of stocks is VND19,000 billion, or 2.1 per cent of GDP, a too low percentage compared to 6.3 per cent of Bangladesh whose GDP is equal to Vietnam’s and 22.3 per cent of China. On the other hand, financial figures of enterprises are not open, making stock transactions short of basic information.

 

To mobilise capital efficiently, enterprises should improve their management by enhancing their transparency (transparent accounts and advanced business management) and launching their initial public offering (IPO), said Mr Lee Sang Joon. In addition, it is necessary to develop financial systems and supporting policies. They should carry out financial transactions, promote effective capital raising schemes and in particular boost investment by issuing bonds, etc.