Administrative hurdles, sluggish markets slow equitisation process
The deputy head of the Government Office, Pham Viet Muon, spoke to the newspaper Thoi bao Kinh te Sai Gon (Sai Gon Economic Times) about the equitisation of State-owned enterprises.
Could you comment on the progress of the State-owned enterprises (SOEs) equitisation process so far?
SoEs equitisation began in 1992, and since 2001 it has been accelerated. By the end of 2011, we had equitised nearly 4,000 enterprises. The number of SOEs dropped from the original 12,000 to 5,655 in 2001. Now, there are only 1,309 enterprises wholly owned by the State nationwide.
Basically, most SOEs are turning into joint stock companies, attracting more resources from the society. More importantly, the management of these enterprises has been publicised.
Some data show that in 2011 and the first quarter of 2012, the number of equitised SOEs is very modest. Why does the process slow down?
In 2011, the number of equitised SOEs was very small, only 60 enterprises. In the first four months of 2012, only four enterprises were equitised. These are the enterprises whose equitisation processes were carried over from 2011.
The slowdown this year is because ministerial and local agencies, as well as the State groups and corporations, only focus on the initial stage of equitisation at the beginning of the year. The first quarter is often the time for preparation. Corporate values are announced in the second quarter and not until the third and fourth quarter do results show up. This is one of the reasons.
Another reason is that policies, typically Decree 59/2011/ND-CP, only address some issues. Corporate value assessment which requires making land management schemes that meet the prevalent regulations in order to reorganise and handle properties in accordance with the Government's decision, and then submitting to the local authorities before carrying out corporate value assessment is one such overlooked issue. In addition, the review of liabilities, audits of value assessment results, and financial processing for enterprises with capital scale of over VND500 billion (US$23.8 million) active in the fields on insurance, banking, post and telecommunications, aviation and exploitation of coal, oil, gas and rare minerals is also time consuming. Administering agencies of the State economic groups and corporations spend a great deal of time and run into many problems when trying to meet such requirements.
There are other reasons, such as the equity market is yet to recover. Sluggish demand discourages enterprises from offering stakes for sale. In 2011, for example, an enterprise offered a 20 per cent stake but only 3-10 per cent was acquired.
Apart from the aforementioned reasons, the guidance of ministerial and local agencies, State groups and corporations is not drastic enough.
What is the target of equitisation?
The Government has approved most of the reorganisation schemes. Only the Ministry of National Defence, HCM City and Dak Nong have yet to submit their schemes for SOEs reorganisation and reform.
According the re-organ-isation schemes, there are only 1,309 wholly SOEs left. In the period from now until 2015, 692 enterprises will remain their State wholly-owned status, and 573 will be equitised.
Of these 573 SOEs, the State will hold stakes of over 75 per cent in 30 enterprises, over 65 per cent in 45 enterprises, over 50 per cent in 108 enterprises and below 50 per cent or no stake in 391 enterprises, while 44 enterprises will be dissolved or restructured.
In order to equitise the 573 SOEs by 2015, some 150 enterprises must be equitised every year starting now. It is necessary to revise Decree 59 on land, audit, statistics, inventory, financial processing, and handling redundant labourers.
Of the 573 SOEs to be equitised, only a few are under management of local authorities. Most of them belong to the six ministries, together with the two cities HCM City and Ha Noi. These ministries and cities are milestones in SOEs reorganisation and equit-isation. If they fail to give proper guidelines, the goal of equitisation would be hard to achieve.
For instance, there are as many as 91 wholly SOEs in HCM City. From now to 2015, 22 enterprises will remain unchanged and 69 enterprises will be equitised. To equitise all of them is far from simple. It requires strong determination.The equitis-ation of SOEs in HCM City is progressing at a slow pace. — VNS