return icon

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.

In 2018, Vinafood 2 was equitized with the state holding 51.43 percent of charter capital, and the strategic shareholder T&T Group holding 25 percent and other shareholders 23.57 percent.







Vinafood 2 had been incurring loss until equitization. The situation did not become better after equitization despite the presence of the strategic investor. The corporation took a loss of VND43 billion in Q2 2020. By the end of H1, Vinafood 2 had incurred z loss of VND160 billion, raising the accumulative loss to VND2.188 trillion.

Explaining the unsatisfactory business result, VInafood 2 attributed it to changes in rice import policies of the countries that are Vinafood 2 clients.

The countries haf set up more barriers to protect domestic production. Besides, the government’s decision on stopping rice exports for a certain time led to aa drop in exports.

Meanwhile, experts, when commenting about Vinafood 2’s operation after the equitization, said the corporation is like ‘old wine in a new bottle’, i.e. though Vinafood 2 has been equitized and operating as a joint stock company, it is still has a high state ownership ratio.

With the high ownership ratio, the state, as the biggest shareholder, is still holding the decision-making power. This explains why there have been no changes in corporate governance.

The experts warned that if the governance mechanism doesn’t change, the corporation will continue taking a loss, which could cause the state and shareholders to lose their capital.

Song Hong JSC is another equitized enterprise. A report from the Ministry of Construction showed that the enterprise, equitized in 2010, has been going downhill in the last few years.

The enterprise reported the loss of VND67 billion in 2019 and the accumulative loss of VND958 billion. Its stockholder equity was minus (-) VND651 billion at the end of 2019.

In 2018, the holding company of Song Hong JSC had revenue of VND213 billion, but its cost was high at VND589 billion, so it took a loss of VND376 billion.

The government’s report to the National Assembly in late 2019 named a lot of unprofitable equitized enterprises. Vinafood 2 incurred the loss of VND1.488 trillion, Song Hong JSC VND387 billion, and Vinaincon VND313 billion.

The government believes that the high state ownership ratio make enterprises less attractive in the eyes of investors. It also makes it difficult to change corporate governance, thus affecting enterprises’ production and business performance.

An expert commented that one of the aims of equitization is to improve production and business, but if the state still holds the controlling stake, this is impossible.


The government believes that the high state ownership ratio make enterprises less attractive in the eyes of investors. It also makes it difficult to change corporate governance, thus affecting enterprises’ production and business performance.


If problems still exist, not only will enterprises suffer, but the whole economy will also be affected. In the case of Vinafood 2, for example, as the big rice trader met difficulties, this affected rice production, exports, farmers’ lives and the nation’s food security.

Equitization delays

In the World Bank’s Doing Business 2019, Vietnam’s investor protection index saw improvement, but it was still far lower than that of other regional countries. Indonesia ranks 51st, Thailand 15th, Singapore 7th, Malaysia 2nd, and Vietnam 89th.

The Ministry of Planning and Investment (MPI), in its draft SOE governance plan, commented that the agencies representing enterprises’ owners still don’t pay appropriate attention to the protection of minority shareholders, which can be seen in the lack of specific regulations on the methods and tools to implement equal treatment to minority shareholders in the SOEs they are assigned to manage, except the state’s general regulations.

According to the ministry, the shift from 100 percent state owned enterprises into joint stock companies gives good conditions to apply corporate governance standards.

However, equitization has been going slowly, which is partially attributed to the weak determination to implement equitization plans.

When facing problems in enterprise appraisal, debt settlement or land use rights, officials dare not make decisions themselves, but consult with other agencies, which takes a lot of time.

“The concern of the officials is so serious that they will accept criticism on being slow in making decisions, rather than make decisions without consultation with relevant agencies,” an expert said.

Meanwhile, the current regulations on disciplining the leaders for slowing down enterprise equitization are still not clear.

Ngo Tri Long, former director of the Institute for Market and Price Research, warned that if the state doesn’t have a specific mechanism to solve the existing problems to speed up divestment, it will incur bigger losses.

He went on to say that the tardiness in equitizing enterprises will lead to the feeling of insecurity of the leadership and workers, thus directly affecting business efficiency.

If Vinafood 2, Song Hong and other enterprises cannot solve their problems soon, not only their strategic shareholders but the state and thousands of workers will also suffer. 

Luong Bang

Vietnam looks to attract foreign investment in equitisation of SOEs

Vietnam looks to attract foreign investment in equitisation of SOEs

As the Government is focusing on accelerating the privatisation and divestment of State-owned enterprises (SOEs), attracting foreign investment is important to the success of the progress,

Unprofitable SOEs avoid bankruptcy

Unprofitable SOEs avoid bankruptcy

The number of bankrupt state-owned enterprises (SOE) in reality is low, and is not commensurate with the number of private enterprises in bankruptcy.



Vietnam Airlines plans to restore its entire flight network by the end of 2023

The restoration of international flight routes is an important condition for Vietnam Airlines to reduce losses and become profitable in the near future.

Saigon Zoo elephant dung used to make paper

A Saigon Zoo member of staff and a group of students are transforming elephant dung into paper.

Future of Hanoi’s 120-year-old Long Bien Bridge unclear

Long Bien Bridge, the iconic bridge across Hanoi’s Red River, has degraded, but no major repair plan has been finalized and its future is unclear.

Information & Communications Ministry works to create modern digital infrastructure

The Ministry of Information and Communications will exert efforts to create a modern and safe national digital infrastructure, and a new space for digital economic growth, and developing e-government towards the building of a digital government.

Vietnamese NA Chairman begins official visit to UK

National Assembly (NA) Chairman Vuong Dinh Hue arrived at Heathrow Airport in London on June 28 (local time), beginning his three-day official visit to the UK.

Vietnam to establish industrial environmental index

The Ministry of Planning and Investment (MPI) has called for the implementation of an industrial environmental index in Vietnam, according to Le Thanh Quan, head of MPI's department of economic zone management.

Rising costs cast doubt on wood companies growth prospects

As wood export turnover is rebounding with rising demand in the domestic market, the revenues of wood enterprises are expected to advance.

Vietnam’s GDP expands 7.72% in second quarter of 2022

Vietnam’s Gross Domestic Product (GDP) in the second quarter of this year was estimated to increase 7.72% year-on-year, higher than the growth rates in the same quarters during the 2011-2021 period.

Danish Crown Prince Couple to visit Vietnam in November

Wind energy and energy efficiency will be in focus during the visit, which will take place on November 1-2.

Spanish university offers well-being courses

Lisa Bevill, Academic Director of the Center for Health, Well-being, and Happiness at IE University of Spain, talks with VietNamNet about the university’s “well-being courses” which set a foundation for students to find “the next best you”.

Health Ministry denies oversupply of Covid-19 vaccines

Duong Thi Hong, Deputy Director of the Central Institute of Hygiene and Epidemiology, has confirmed that the current Covid-19 vaccine supply is only enough to give booster shots.

Domestic air transport sees fast recovery, airlines suffer loss due to rising fuel prices

Vietnamese airlines are suffering losses amounting to hundreds of billions of VND each month due to a surge in fuel prices, according to director of the Civil Aviation Authority of Vietnam (CAAV) Dinh Viet Thang.

Finding a way to make money from Saigon River

Ho Chi Minh City has the shape of a river city. However, urbanization and arbitrary construction has encroached on and gradually obscured the river.

Vietnam attracts more than 14 billion USD of FDI in H1

Vietnam reached more than 14 billion USD in foreign direct investment (FDI) in the first six months of 2022, announced the Ministry of Planning and Investment (MPI).

Vietnam needs to develop fintech services for SMEs

Vietnam needs to develop financial technology (fintech) services for small- and medium-sized enterprises (SMEs), according to experts.