The pace of the country’s state-owned enterprises (SOEs) privatization has remained languid this year despite the government’s efforts, preventing foreign investors from pouring in the firms despite their strong interest.

Vietnam Pharmaceutical Corporation has failed to complete its divestment plan

According to reports from the Ministry of Finance, only twelve SOEs were privatized in the first eleven months of the year, with total value of more than VND29.747 trillion (US$1.29 billion). Meanwhile, the government plans to sell 85 SOEs in 2018.

In addition, the divestment process for SOEs has also lagged behind schedule. Some 135 SOEs were scheduled for divestment in 2017 and 181 others in 2018. However, only 31 firms have finished the divestment process on schedule.

Some big SOEs, which have failed to complete their divestment plan, include Vietnam Engine and Agricultural Machinery Corporation, with total value of VND7 trillion (US$304.3 million), Vietnam Pharmaceutical Corporation (VND829 billion or US$36 million), eight enterprises under the Ministry of Construction (VND2.4 trillion or US$104.35 million) and 17 enterprises under Hanoi’s management (VND526 billion or US$22.87 million).

Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, told the local media that the Vietnamese government is boosting SOE privatization, and this reflects the government’s strong will and efforts in speeding up economic restructuring.

Many South Korean businesses are seeking to purchase stakes from Vietnam’s big SOEs, but the process proves very difficult because the enterprises that the state wants to divest capital from do not reveal any information, he said.

According to Sun, it is often considered sensitive for an enterprise in Vietnam to reveal information before its stake can be sold. This has made it difficult to accurately assess the potential mergers and acquisitions (M&A) partner. Thus, SOE privatization has not met the expectations of the government.

Sharing the same view, Nguyen Viet Ha, managing director of US-backed investment consultant BowerGroupAsia Inc.’s Vietnam Office said that in almost all cases when SOEs are about to begin privatization, investors cannot access information from these firms. Almost no material about how they operate is provided for investors, and investors are often not allowed to visit their factory.

Bold actions

Experts blamed the lack of responsibility among the boards of directors of these firms for the weak performance.

Prime Minister Nguyen Xuan Phuc stressed at a recent meeting that the tardiness should be promptly handled to avoid affecting SOEs’ restructuring efforts on one hand while fighting interest groups in such deals on the other hand.

Responsibility of all individuals and organizations in delaying privatization, divestment, transaction registration, and listing in the stock market will be specified. Those who failed to perform the tasks will be punished, Prime Minister Phuc stressed.

“We will radically deal with all SOEs and investment projects with delay and losses. Any ineffective SOEs will face bankruptcy or transfer to investors of other economic sectors,” he said

The government will intensify inspections over not only all SOEs and state-funded projects, but also over the heads of these enterprises about how they have obeyed state regulations about privatization and divestment, as well as performance of their businesses.

Periodically, all information about privatization and divestment must be openly publicized, so that the SOEs’ performance can be supervised, the Prime Minister noted.

The Ministry of Finance also asked relevant ministries and departments to complete the endorsement of projects in need of privatization and divestment by December 31, in line with Decision 707/QD-TTg approved by the Prime Minister that stipulates the required progress for privatization plans.

Hanoitimes