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How to remove the delay in equitisation and divestment? Part 4: The sale of capital and debt recovery should be separated to avoid losing State capit

13:25 | 27/09/2019

VCN - State divestment in enterprises is an important part of restructuring, innovating and improving the efficiency of State-owned enterprises (SOEs). However, State divestment in enterprises is still very slow. Besides the positive results, the sale of State capital in enterprises by the State Capital Investment Corporation (SCIC) has also encountered many difficulties and obstacles.

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how to remove the delay in equitisation and divestment part 4 the sale of capital and debt recovery should be separated to avoid losing state capital
Overlaps in regulations in many documents are obstacles for SCIC in the management and divestment of StateState capital in enterprises. Photo: ST.

Successful divestment in nearly 1,000 enterprises

Implementing the policy of selling State capital in enterprises in the list of enterprises completing divestment in 2017-2020, approved by the Prime Minister, the progress of selling State capital in enterprises is still behind the plan and faces many difficulties and obstacles. According to data of the Steering Committee for enterprise renewal, until now, the State capital sale has just been completed in 88 among 406 enterprises, reaching 21.8 percent of the list in Decision No. 1232 / QD-TTg. Thus, the number of enterprises to be divested by the end of 2020 is 318 enterprises, accounting for 78.3 percent of the plan.

With the SCIC's sale of State capital, according to the SCIC's data, from its establishment (in 2006) to now, the SCIC has received the right to represent the owner of State capital in 1,059 enterprises with total value of nearly VND 21,500 billion. However, as of June 30, 2019, SCIC's list of enterprises is only 145 enterprises with a State capital of nearly VND 28,950 billion, over total charter capital of VND 99,500 billion. Thus, SCIC has successfully divested nearly 1,000 enterprises, collected nearly VND 47,200 billion, 4.2 times higher than prime cost. Among them, some big enterprises have been divested such as Vietnam Dairy Products Joint Stock Company (sold 5.4 percent in 2016 and 3.3 percent in 2017, and earned VND 20,276 billion), Binh Minh Plastic Joint Stock Company (sold shares in 2018 and earned VND 2,330 billion), Import and Export Joint Stock Corporation - Vinaconex (sold in 2018 and earned VND 7,366 billion).

Tran Nguyen Nam, Deputy Director of SCIC's General Planning Department, said implementing Prime Minister's Decision No. 1001 / QD-TTg dated July 10, 2017 approving the SCIS’s plan on enterprise arrangement and classification by 2020, from 2017 to the end of June 2019, SCIC has sold capital in 51 enterprises, of which capital in 47 enterprises was sold out (reaching about 38 percent of the list assigned) and sold a part of capital in four enterprises. The total value obtained was VND 20,110 billion on the prime cost of VND 3,469 billion, the difference was VND 16,642 billion, reaching 5.8 times (higher than the national average in the 2011-2015 period of 1.48 times). In the first six months of 2019, SCIC successfully sold capital in four enterprises including Tuyen Quang Mechanical Joint Stock Company, EMECO Environmental, Mechanical and Electronic Technology Joint Stock Company, Can Tho Housing Development Joint Stock Company, and Son Kim Mineral Water Joint Stock Company with a revenue of nearly VND 166 billion, 4.6 times higher than the prime cost.

Is the new responsibility heavy?

Recently, the SCIC's responsibility is heavier with divestment slow. In early 2019, the Prime Minister issued Directive 01 / CT-TTg to request ministries, sectors, localities, groups, corporations, SOEs, and representatives of State capital in enterprises to build a specific roadmap and schedule to deploy divestment in enterprises under Decision 1232 / QD-TTg (August 17, 2017); review units which have not implemented the divestment in the 2016 - 2018 period to transfer to SCIC to implement in 2019 – 2020. The time for the transfer was before March 31st 2019. Thus, under Decision 1232, the number of enterprises transferred to SCIC in 2019 is remarkable.

However, this transfer so far has not achieved expected results. According to Le Song Lai, Deputy General Director of SCIC, after receiving Directive 01 / CT-TTg, SCIC has worked with the Ministry of Finance and State Capital Management Committee at Enterprises to send a dispatch to urge ministries and sector and localities to provide the list of enterprises which have not divested. But, except for the Ministry of Industry and Trade and the Ministry of Culture, Sports and Tourism, the remaining ministries, sectors and localities have not handed over the list or have handed over only part of the list. Le Song Lai said in written response to the SCIC that ministries, sectors and localities all admitted to having difficulties in divestment, so they have not implemented the divestment and ask to continue managing these enterprises and divesting capital in these enterprises in 2019 and 2020.

It is estimated that about 70 enterprises in this list will be transferred in the near future, bringing the total to about 100 enterprises which will be transferred to the SICI. Previously, also according to Decision 1232, in 2017-2020, ministries, sectors and localities must transfer 62 enterprises (four enterprises in 2017, 55 enterprises in 2018, three enterprises in 2019) to SCIC, but so far only 32 enterprises have been transferred. Specifically, by the end of 2018, only 30 of 62 enterprises had been transferred with a total State capital of VND 4,069 billion. In the first six months of 2019, two more enterprises were transferred to SCIC (Vung Tau Culture and Tourism Development Joint Stock Company with the State capital of VND 751 million, Vietnam Steel Corporation with a capital of VND 6,368 billion).

Also according to a SCIC leader, with the experience of receiving ownership of State capital in large-scale enterprises, even economic groups such as Vinatex, the reception of more than 100 enterprises is not too difficult, because most of them have scale much smaller than some enterprises that SCIC has received. Particularly in 2018, SCIC received 14 enterprises from ministries, localities with capital of VND 4,055 billion, many times higher than previous years with many large-scale enterprises such as Vinatex, Licogi, Seaprodex (Vietnam seafoodCorporation.


The receiving may not be too difficult, but further divestment in these enterprises is obviously not a simple problem for SCIC because many enterprises subject to equitisation and divestment in this period have large scale, are multidisciplinary and have multi-sector operations with wide range of activities, financial and land complexity , enterprise valuation, meanwhile new regulations on equitisation and divestment are stricter to avoid loss of State assets, so the process and progress will be longer. The divestment itself of SCIC has also been facing many difficulties and obstacles.

Regulations only focus on framework regulations and are principally, so in implementation, SOEs often have to consult with State agencies to deal with problems. In addition, there is a difference between the current regulations on the sale of State capital and international practices. Further, under the provisions of Decree 32/2018 / ND-CP, the addition of value land use rights to the value of enterprises to sell capital may lead to many inadequacies.

"Due to the absence of specific legal provisions on the selection of methods to determine the value of enterprises in the divestment of State capital, it has created enormous legal risks for those who make divestment decisions," said Nguyen Tran Nam.

Regarding enterprises subject to divestment, the problem is the ownership rate of State shareholders is small or other shareholders dominate the enterprises (holding more than 51 percent) or 51 percent), reducing the attraction of the State share. Those enterprises are weak and suffer long losses, and do not have advantages of land, or the enterprises have many internal conflicts, disputes between shareholders, or the leaders have violated the law and are being handled. The starting price for selling capital is too high compared to investors' expectations, the method of selling capital is sometimes rigid and the time of selling capital is not reasonable.

Based on the practice and experience of the SCIC in State capital divestment, it proposed some solutions to promote divestment. Accordingly, the representative of the SCIC noted ministries and localities should seriously implement the transfer of the ownership of State capital in enterprises listed to transfer to SCIC.

At the same time, the authorities are requested to supplement and amend provisions in Decree 32/2018 / ND-CP and Circular 59/2018 / TT-BTC guiding Decree 32 in the direction of reducing the starting price, considering abandoning the competitive offering step in the process of selling shares, supplementing the case of selling the whole shares to sell all State shares at enterprises.

Besides, it is necessary to separate the process of capital sale and debt recovery in the direction that the debt management and recovery should be considered regular work before, during and after the sale of shares.

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The SCIC representative also proposed allowing SCIC to develop a mechanism on debt trade between SCIC and debt trading organisations in the market such as DATC or VAMC. If this mechanism is developed and implemented, bad debts in enterprises under SCIC's divestment schedule will be considered and negotiated to re-sell to DATC / VAMC, thereby helping SCIC accelerate the divestment, timely recovering capital to the State and completing the process of equitisation. Simultaneously, DATC / VAMC in the role of shareholders will support the enterprises leaders to improve governance and financial situation, contributing to improving operational efficiency

By Thu Hien/ Huyen Trang