VietNamNet Bridge – The government may allow state owned economic groups and general corporations to sell stakes at the prices below the book value as a solution to accelerate the state owned enterprise (SOE) restructuring process.

“We are considering the solutions for SOEs to withdraw the state’s capital from other enterprises by selling stakes at below the face value,” said Deputy Minister of Finance Vu Thi Mai, answering the inquiries about the SOE equitization performance at the Vietnam Business Forum held in early December.

“The government would release necessary documents to elaborate on the issue so as to help speed up the process of SOEs withdrawing capital from non-core business fields.

The report by the Ministry of Finance (MOF) to the National Assembly in November 2013 showed that the process has been going very slowly. SOEs, which injected capital in securities companies, investment funds, banks, insurance and real estate firms, still cannot withdraw from the business fields due to the gloomy stock market.

By the end of 2012, the total investment capital poured by SOEs into the banking sector, had decreased inconsiderably to VND13.152 trillion. The figure had been VND6.089 trillion in the real estate sector.

According to Nguyen Duy Long, Head of the MOF’s Enterprise Renovation, Restructuring and Development Division, the capital withdrawal process has been at a standstill because of SOEs cannot find the buyers who accept to pay the high prices which are equal to the book value.

The gloomy stock market with the continued stock price decreases has made the SOEs’ investment value decrease dramatically. Meanwhile, the government still insists that SOEs must not sell the stakes at a loss.

Agreeing with Long, Tran Xuan Hoa, President of the Vietnam Coal and Mineral Industries Group (Vinacomin), said: “Once the government insists on the principle that the state’s capital must not be sold at below the book value, everyone knows how far the equitization process would go.”

Hoa thinks that if the government allows SOEs to sell stakes at below the face value as Mai said, this would help settle the biggest problem which has been hindering the capital withdrawal process.

He went on to say that it would be better to sell stakes at a loss today, rather than losing all the capital in some days.

“What is better, selling stakes to get money to make investment in profitable business fields or grip the stakes and keep the businesses operating at a moderate level?” Hoa questioned.

Experts have also many times urged the government to turn the green light to the equitization process by allowing to sell stakes at the market prices, which could be lower than the expected prices.

The story about General Motors (GM) has been cited to show that when necessary, the government needs to pay money in exchange for better things.

In 2009, when the US experienced the darkest days and GM was in the danger of getting bankrupt, the government decided to rescue the company by buying 61 percent of its stakes and restructuring it.

After four years, the government has sold all the GM stakes it held at $39 billion, much lower than the sum of $49.5 billion it spent to buy the stakes. However, in return for the $10 billion loss, the US has helped rescue the US automobile industry and create jobs.

A report showed that if the plan had not been implemented, the automobile manufacturer’ collapse would have made 1 million workers lose their jobs, billions of dollars of personal savings would have lost, while the productivity of the national economy would have been seriously affected.

Thanh Mai