New driving force for SOE restructuring
Under the new rule in the revised law passed by the NA last month, an enterprise is a SOE when its 100% stake is held by the State, instead of 51% as before.
Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM), said such a change will create a new driving force for the restructuring of SOEs in Vietnam as it will create a new legal framework enabling enterprises to be more independent in operations.
According to Cung, after being equitized, an enterprise will no longer be a SOE but operate as a private company or a joint stock company. Therefore, there will be many changes concerning rights and obligations of such enterprises.
“After enterprises go public, outside shareholders are equal and have their rights and benefits protected. They will be no longer dominated by State shareholders,” Cung pointed out.
Cung said strategic shareholders are encouraged to invest more in equitized SOEs and more investors will help accelerate equitization.
“They will be real investors rather than shareholders who invest in equitized enterprises to enjoy the privileges of SOEs like previously,” he explained.
Nguyen Van Phuc, deputy head of the NA’s Economic Committee, shared Cung’s view, saying that old regulations on SOEs did not create an impetus for outside shareholders to contribute their capital as they are afraid of being tightly controlled.
However, the new regulation will speed up equitization, restructuring and capital divestment as well as attract investors from other economic sectors to pour their money into equitized firms.
The equitization process in Vietnam has been slowed. According to the Ministry of Planning and Investment, there have been around 100 enterprises undergoing equitization, a modest number compared to 432 candidates to go public this year and next as required by the Prime Minister.
A report the Government sent to the NA recently revealed there were 796 enterprises wholly owned by the State as of late last year. If 432 SOEs complete equitization next year, the number of SOEs will drop to 364.
Victoria Kwakwa, the World Bank’s Country Director for Vietnam, noted that the Government should focus on the quality of equitized enterprises rather than the quantity. She stressed the importance of increasing private ownership at SOEs to make it more attractive to investors and improving corporate governance.
Besides, Kwakwa urged Vietnam to improve transparency via regularly disclosing information, stopping offering financial and land incentives and strengthen budget requirements on SOEs.
According to the Ministry of Finance, 100% state-owned enterprises owed a combined debt amount of VND1,515 trillion last year.
