return icon Vietnamnet.vn

Post-equitization period: high hopes put on strategic investors

The equitization of state-owned enterprises must place more importance on the management experience of strategic investors.

New corporate governance needed

The news about the enterprises which still have losses in equitization such as Vinafood 2, Song Hong JSC and Licogi have led to questions about changing the governance method to help equitized enterprises operate more effectively.

 

{keywords}

Vinafood 2 changed its key personnel in February 2020

 

 

Analysts said equitizing enterprises while still using the old corporate governance method, or ‘putting old wine into a new bottle’ as described, won’t improve the situation of enterprises.

According to Vu Dinh Anh, a respected economist, under current regulations, all the enterprises which sell state capital are listed as ‘equitized enterprises’, no matter how much capital the state sells.

Under the amended Enterprise Law, the enterprises in which the state still holds more than 51 percent of shares, will still be considered ‘state owned enterprises (SOEs)’. And as SOEs, the enterprises will have to follow the corporate governance method applied to SOEs.

As for these enterprises, Anh said ‘there is no hope about the change in corporate governance’.

However, Anh said that in many cases where non-state shareholders hold a small proportion of shares, they still can control the operations of the enterprises.

In the banking sector, for example, under current laws, an individual can hold no more than 5 percent of the capital of one bank. As such, there are individuals who hold 5 percent or less but still can control the bank.

“So, it is not necessary to hold the overwhelming proportion of shares to control a business. This depends on businesses and investors’ capability,” he said.

Anh said it waspietant to find a mechanism that helps the majority of businesses, or equitized enterprises, to change the way of administration.

In many cases, the people representing the state’s capital in equitized enterprises don’t make contribution to the change of governance, and many of them cannot satisfy the requirements. They still have to ask for permissions from governing bodies, or the State Capital Management Committee.

 

In many cases, the people representing the state’s capital in equitized enterprises don’t make contribution to the change of governance, and many of them cannot satisfy the requirements. They still have to ask for permissions from governing bodies, or the State Capital Management Committee.

 

This happens in both the enterprises where the state holds a controlling stake, or doesn’t hold controlling stake. Meanwhile, the governance experience of private investors and strategic investors in the board of directors cannot be promoted.

Giving power to strategic investors

Commenting about the intervention by the state into the operations of equitized enterprises, an analyst said the state should have someone or a group that manages and invests with its capital like outside shareholders selecting board of managers.

But it manages, supervises and participates in the enterprises’ decision-making process through its people who are the members of board of directors.

Investors who approach state invested enterprises always face a problem: enterprises have to ask for the permission of the state as a shareholder. Meanwhile, the general meeting of shareholders is the highest decision-making unit as stipulated in the Enterprise Law.

Therefore, according to the analyst, SOEs still face many problems during after equitization. The agencies representing the state are not real shareholders, so they intervene in the operations of enterprises in a way that is incompatible with the role of other shareholders in the same enterprises.

He believes that in the equitized enterprises where the state holds a controlling stake, it would be better for the state yo choose the right personnel who can help enterprises reach certain goals.

If the state continues the current management method by intervening in the decision-making process and management operations, the agencies’ fear of taking responsibility for decisions alone will be a serious hindrance to the operation of businesses.

Tran Dinh Thien, former director of the Vietnam Economics Institute, said that when equitizing profitable SOEs, it is easy to find buyers, even if the State only sells a small proportion of its capital, because the buyers can see the benefits from their investments.

However, if the SOEs equitized are loss-making ones, private investors will buy shares only if they can have a voice in managing the enterprises and making decisions on the enterprises’ development strategies. So, if the state still holds the controlling stake in these enterprises, the sale doesn’t make much sense.

“To let non-state investors get involved in the enterprise administration, they need to hold a large proportion of shares. In principle, the state should sell all the capital of the enterprises in business fields which do not need the state’s investment,” Thien said. 

Hai Nam

SOE equitization: state takes loss, and investors lose money

SOE equitization: state takes loss, and investors lose money

Many state-owned enterprises (SOEs) have been equitized but have not seen considerable changes as the state's ownership ratio remains high. Many of them are still taking losses and struggling to survive.

Equitisation doesn't necessarily mean a better future for SOEs

Equitisation doesn't necessarily mean a better future for SOEs

Equitisation should be a magic wand to improve the performance of a State-owned enterprise (SOE), but in some cases, it is not.

MORE NEWS

Shelter cares for 20 breast cancer patients in HCM City

No longer allowed to stay in a hospital, a breast cancer patient sold her house to rent and provide a shelter for 20 patients coming from all over the country to Ho Chi Minh City for chemotherapy and radiation treatment.

G&P Global Ratings raises Vietnam’s sovereign credit rating

The S&P Global Ratings on May 26 raised its long-term sovereign credit rating on Vietnam to “BB+” with a “stable” outlook on the back of strong economic recovery, according to the Ministry of Finance.

Domestic airlines offer millions of tickets for summer travel season

Anticipating that travel demand during the upcoming summer will rise sharply, and even higher than the pre-pandemic levels, local carriers are offering millions of air tickets.

American doctor’s endless love for Vietnamese ethnic minority cultures

When listening to him talk for hours and hours about the objects he found by chance on trips to different mountainous regions, it is easy to see Mark Rapoport's passion for the ethnic groups of Vietnam.

Two new Viettel inventions granted exclusive protection certificate in the US

Viettel Aerospace Institute (VTX), a member of Viettel Group, was officially granted an exclusive protection certificate by the US Patent and Trademark Office (USPTO) for two works in the field of optoelectronics and materials industry.

SEA Games 31 fuels recovery of local tourism industry

The hosting of the recent 31st Southeast Asian Games (SEA Games 31) between May 12 and May 23 can be viewed as a golden chance for the local tourism industry to recover after months of little activity due to the impact of the COVID-19 pandemic.

HCM City Mayor shows concerns as doctors turn from ‘heroes’ to ‘violators’

With great efforts in the fight against Covid-19, medical workers have been honored as heroes.

Stopping the licensing of new airlines, restricting the expansion of fleets

Controlling the number of new airlines until the market recovers and restricting licensing to expand fleets in the immediate time are solutions proposed by the State Capital Management Commission (SCMC).

Luxury-tax hike should be postponed until after 2024

Discussing the luxury tax law, experts said it is necessary to design a reasonable taxation roadmap and begin raising the tax only after 2024.

Huge haul in new markets for Vietnam’s tra fish exports

Demand for Vietnam’s tra fish (pangasius) is up in major markets, driving the export of the catfish overseas, reports the Vietnam Association of Seafood Exporters and Producers (VASEP).

Facebook collects money from partners to pay tax in Vietnam

The amount of money Facebook is planning to collect from Vietnamese partners accounts for 5 percent of invoice value. The money will be used to fulfill tax obligations.

Vinh Phuc: Wall collapse kills three people

Three people were killed and another seriously injured in the northern province of Vinh Phuc after a wall of a house collapsed and buried them.

JPMorgan Chase announces fresh capital injection into VN

JP Morgan Chase on Thursday announced a capital injection of US$123 million into its branch entity in HCM City, bringing the firm’s total capital investment into Viet Nam from $77 million to $200 million, or VND4.6 trillion.

Vietnam ready to facilitate long-term business and production of foreign firms

The nation continues to pay close attention to and attaches great importance to improving the investment environment and creating favourable conditions in which foreign enterprises can conduct long-term production business in the country.

Family of four found dead in Hanoi in apparent murder-suicide

Four members of the same family were found dead in an apartment complex in Hanoi's Hoang Mai District.
back_to_top