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VietNamNews

Simplify SOE restructuring: Investors

Update: April, 06/2012 - 10:15

HA NOI— A plan to speed up restructuring of State-owned enterprises to help improve their performances has been proposed by the Viet Nam Association of Financial Investors .In a letter to Minister of Finance Vuong Dinh Hue on Tuesday, the association suggested SOEs be transformed into share-holder companies with three major shareholders as an initial step.

The three major shareholders should include representatives from the individual SOE's trade union, Communist Party and the State.

The State, however, should still hold 99.999 per cent of shares of the new companies with the balance being held by the other two shareholders.

The suggested shareholding was a technical solution and "definitely not an equitisation process", association general secretary Nguyen Hoang Hai said.

However, such a move would bring huge benefits to the State budget while improving enterprises' corporate govern-ance, Hai said.

For a start, several costly requirements for equitisation plans would be removed, such as the need to employ a team in charge of implementation and the requirement to assess the value of each equitising enterprise, among others.

Also, the equitising companies would not need to make initial public offerings.

The move would also result in a major revenue boost, Hai said. Under the existing regulations, SOEs kept residues from their earnings after taxes and were not obliged to pay dividends for the shares held by the State, as did other shareholding companies.

Under the solution suggested by the association, the new companies would be required to pay dividends to the State budget for the shares held by the State from their earnings after taxes.

He cited the experience of Thailand where the Government held about 51 per cent of shares of many huge corporations while the Thai State budget received about 10 per cent of its annual revenues from those firms' dividends.

If the measures suggested by the association were implemented next year, the total dividends collected from the new companies would be "huge", up to US$4 billion per year, accounting for 10 per cent of the Vietnamese State budget revenue, the association said.

Hai said it was unfair that incentives, which included natural resource exploitation, had been provided to SOEs, such as MobiFone, Vinaphone, Viettel, Petro Vietnam and Vinacomin, but they had not been required to pay dividends. As a result, such incentives had driven those SOEs to monopolise the domestic market.

The association's proposed measures would also help avoid investment in non-core businesses by State-owned groups and corporations.

Hai said that thanks to the SOE reorganisation process over the past 20 years, many small SOEs had grown larger, with a significant increase in their charter capital.

However, hundreds of huge corporations, who were still receiving incentives for their business operations, had not yet developed re-organisation plans and there were no effective policies to force such companies to restructure or to strengthen State management of their operations.

If the proposed solution was introduced, the number and speed of SOE restructuring would be increased significantly and their performances enhanced.

Government Office statistics showed that after 10 years of equitisation, the number of SOEs had been reduced to 1,309 from 5,655. — VNS

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