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State-owned enterprises map out first steps for restructuring

Update: September, 25/2013 - 09:35

As State-owned companies prepare to tighten their belts, National Assembly Economic Committee Vice Chairman Nguyen Duc Kien spoke with Thoi bao Ngan hang (Banking Times) about their future

In your view, how much of the restructuring process has been achieved by State-owned enterprises (SOEs)?

State-owned enterprises have adopted equitisation road maps - the first step in the process of restructuring. In this process, it is imperative to define the enterprise's ownership role and business rights. These two issues must also be reflected in regulatory documents.

In regards to winding down investments in non-core business activities, the first thing we have to say is that these investment decisions have been made in line with the development of a market economy.

In my view, enterprises must stop investing in non-core businesses that have been unprofitable.

It is said there are two options for ownership - to establish a National Management Committee or assign it to a ministry or local government. What do you think of the proposal?

Each option has advantages and disadvantages. The second option follows the model of bo chu quan (ministry ownership).

However, we have to agree that our economy at present is not stable which has negatively affected the operations of enterprises.

As a result the contribution of state-owned enterprises to the national economy is below expectations. This is the key reason we have to review the SOE model, which was introduced 10 years ago by the Party Central Committee.

I hope that following an intensive review of the Party's Resolution, we'll be able to come up with a better model, more fitting to our current economic situation.

The Ministry of Planning and Investment has been assigned to report on improvements to the SOE model.

Do you know how much money has been invested by SOEs on non-core business activities?

As far as I know, the amount is around 5 per cent of total capital, which isn't much.

For example, the Viet Nam Electricity Corporation (EVN) has an affiliate - EVN Telecom. The main purpose of EVN Telecom is to manage the trans Viet Nam 500Kv electrical grid fiber cables. If EVN Telecom only manages the Trans Viet Nam 500Kv electric grid, obviously the business operates at a loss.

But that's why it has to run other businesses. If we look at the development diagram for telecommunications, there are only three firms that provide GSM technology with only three others offering CDMA - with EVN Telecom one of the three firms. CDMA technology was shortlived and it led to the loss of EVN.

Do you think that by 2015 the withdrawal of non-core business investment by SOEs in the banking sector will be complete?

Yes, it is a must! They even have to complete the process before the deadline so that the banking sector can start its own restructuring process.

But the problem now is that the offering price is lower than the book value equity. What's your opinion on this?

Well, the price here should be derived from the potential value and book value. If investors see potential return on the shares, of course they will buy at them at the offering price.

However, we should understand that in a difficult economic situation, it is not easy to sell shares. They are shares, not vegetables. People can live without buying them.

It is said that quite a few foreign investors have expressed interest in buying such shares. But the problem is that the banks have run out of "room." In this case, do you think foreign investors will be allowed to buy the shares?

We have to follow the rules of the game. Should the government give them more "room" for foreign investors to buy shares in the banks, it will depend on each specific bank. — VNS

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