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Speed up SOE equitisation: PM

Update: January, 16/2017 - 09:00
Some major SOEs will be equitised in this period, like the Viet Nam National Chemical Group, Viet Nam Posts and Telecommunications Group and the Viet Nam Bank for Agriculture and Rural Development. — Photo

By Thúy Anh

The process of equitising State-owned enterprises, which has been slower than expected, is likely to get a boost after Prime Minister Nguyễn Xuân  Phúc recently instructed Minister of Finance Đinh Tiến Dũng to take charge of the task and achieve a breakthrough.

The fact that this is the first time that a prime mister has assigned such a mission to his finance minister indicates Phúc’s determination to both speed up the process and make specific organisations and individuals accountable.

Speaking at a recent conference on budget finance, where the PM called for speeding up the equitisation process and State firms’ divestment from non-core businesses, he said he wants a smaller public sector and every SOE to be strong.

“To achieve a breakthrough, I urge the finance minister to act as the commander, taking the key responsibility in this battle and coming up with policies and mechanisms to achieve the goal.”

He also instructed the finance ministry to improve the legal framework for the capital and securities markets to international standards.

The ministry has been taking the charge of working out recommendations and offering consultancy to the Government on equitisation related issues such as corporate valuation and sticking SOE equitisation to listing (the equitisation followed by listing) on the country’s stock exchanges.

Speaking about the equitisation process in 2011 –15, the Steering Committee on Corporate Renovation and Development said despite certain accomplishments, it has yet to reach the desired quality or quantity.

In the past 15 years the number of SOEs has fallen from around 6,000 to over 700.

Between 2011 and 2015 almost 600 SOEs were equitised, or 96 per cent of the targeted number.

But a mere 8 per cent of the companies’ shares were sold to the public and the State still holds 92 per cent, and this has been blamed on the small size of the IPOs.

The Government recently announced a change in strategy. Prime Minister’s Decision 58/2016/QĐ-TTg issued last month fixes the rate of State ownership in individual firms that are to be equitised rather than the sector-wise rate the Government used to fix earlier.

Attached to the decision is a list of 103 SOEs in which the Government will retain 100 percent stake and another 137 that will be equitised in 2016 – 20.

Of the latter, the Government will keep a 65 per cent stake in four firms, 50-65 per cent stakes in 27 and less than 50 per cent in the remaining 106.

Some major SOEs will be equitised in this period, like the Vietnam National Coal – Mineral Industries Holding Corp., Vietnam National Chemical Group, Vietnam Posts and Telecommunications Group, and the Vietnam Bank for Agriculture and Rural Development.

6.6% GDP growth forecast

Việt Nam’s GDP is expected to grow at 6.6 per cent this year following a drought-induced slowdown in 2016, according to Standard Chartered Bank’s Global Research Briefing.

Strong manufacturing growth and increased construction activity are likely to remain the key growth drivers in 2017.

The report expects the 2017 global GDP growth to remain unchanged at 1.5 per cent and be driven by emerging markets.

“The year 2017 is shaping up to be an exciting but volatile year. The potential reflation of the US economy is fuelling optimism, but we think this is overdone, as tightening financial conditions may stunt growth before fiscal stimulus takes root. Tighter conditions are also likely to unleash further volatility, leading to re-pricing of risk in many emerging markets,” Marios Maratheftis, the bank’s chief economist, said.

But the bank remains upbeat about the outlook for Việt Nam, which it believes is getting back on track after the drought.

“Most macro-economic indicators in Việt Nam have improved in recent months, and progress continues to be made in establishing appropriate macro-economic stability,” Nirukt Sapru, CEO of Standard Chartered Bank Vietnam, said.

“We believe Việt Nam will continue to be an attractive destination for investment.”

Chidu Narayanan, SCB’s economist, Asia, said: “We expect FDI inflows in Việt Nam to slow mildly in 2017 but still remain high, at close to US$10 billion.

“The country has benefited from its participation in regional trade pacts, which has helped to attract significant investment. We see minimal negative impact on Việt Nam from the Trans-Pacific Partnership (TPP) potentially not going through, as FDI in anticipation of the TPP had been front-loaded.”

The report expects Việt Nam’s exports to increase only moderately, capped by still-slow demand from markets such as the US and the EU.

It also expects unchanged policy rates and a slight devaluation of the dong and neutral short- and medium-term foreign exchange weightings on the currency.

More flexible legal framework needed to resolve bad debts

State Bank of Vietnam Governor Lê Minh Hưng has said he wants greater involvement of foreign investors in the process of restructuring the country’s commercial banks and handling their bad debts.

He agreed at a recent banking conference on the need for a new law to assist banks in the two tasks.

Existing regulations however require strategic investors to be financial institutions with a charter capital of more than US$1 billion and total assets of $10 billion.

Võ Tấn Hoàng Văn, general director of Saigon Commercial Bank, said there is no need to restrict the participation to financial institutions.

Non-financial players should also be considered since they would consult prestigious organisations and experts in the field on restructuring banks and improving the governance and risk management systems, he said.

He also called for increasing foreign investors’ ownership cap in a credit institution from the current 30 per cent to 49 per cent or more.

HSBC Vietnam CEO Phạm Hồng Hải said the Government should buy part of the bad debts, which would encourage foreign investors to follow suit.

VIB general director Hàn Ngọc Vũ said foreign debt buyers are discouraged since the law does not allow them to own the properties mortgaged for the loans they buy.

He said foreign debt buyers should be allowed to set up a debt trading firm after the purchase of a mortgaged property, and the sellers should be authorised to manage the properties and sell them to repay the money to the debt trading firm. -- VNS




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