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Restructuring of State-run firms faces challenges

Update: February, 17/2012 - 11:08
Workers produce compact lamps at the Rang Dong Light Source and Vacuum Flask JSC. — VNA/VNS Photo Tran Viet
HA NOI — Restructuring of a number of State-owned enterprises has been delayed due to problems of redundant workers, collecting past-due debts and writing down losses, said deputy head of the Government Office and vice chairman of the Steering Committee on Business Renovation and Development, Pham Viet Muon.

Muon told a meeting held here Wednesday by the Government Office and the World Bank that the process of equitising State-owned enterprises (SOEs) has slowed in the past five years.

He said the Government has requested economic groups to submit restructuring plans by March of this year which would be focused on key lines business and plan for divestment from non-core business fields such as banking, real estate development, insurance and securities before 2015. Equitisation of companies was expected to be completed before 2020.

Once operations were totally focused on key lines of business, with improved corporate governance, equitisation plans can be carried out more smoothly, Muon said.

By 2015, the country is expected to have only 692 SOEs that remain wholly State-owned, mostly key economic groups, corporations and major companies involved in fields dominated by State investment. By 2020, this figure is targeted to be reduced to 100.

The listing of equitised companies on the stock market would also help companies become more transparent, improve corporate governance and reduce their dependence on bank loans or State budget financing, Muon said.

Transparency was also a key element in the process of restructuring SOEs, he said.

Viet Nam Posts and Telecommunications Group (VNPT) deputy director Phan Hoang Duc said restructuring should be based on the needs of each business field and each enterprise. The equitisation process also needed to follow specific guidelines for each type of business, with special attention given to workers.

VNPT expected to submit its restructuring plan to the Government during the first quarter of this year, Duc said.

Nguyen Trong Dung, director of Government Office's enterprise renewal department, said that, after 10 years of equitisation, the number of SOEs had been reduced from 5,655 to 1,309.

According to a report released by the World Bank, State-owned enterprises (SOEs) account for only one per cent of the total number of domestic businesses but they hold about 39 per cent of total invested State capital, 45 per cent of total fixed assets and 27 per cent of total outstanding bank loans.

This allocation of resources was not commensurate with their efficiency of operation, causing them to give a lower return on capital than other sectors.

Many SOEs have made the transition to a competitive environment, however, with State-owned garment makers seeing stronger imports and telecoms posting high profits despite tough market competition. — VNS

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