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Finance group proposes SOE restructure
The majority of State-owned enterprises (SOEs) should be transformed into joint stock companies in order to reduce State subsidies while sharpening their competitiveness, theViet Nam Association of Financial Investors (VAFI) has suggested.
VAFI's General Secretary Nguyen Hoang Hai said that Viet Nam had around 1,000 SOEs 100 per cent owned by the State while other countries such as Singapore had very few SOEs.
He said that the State did not need to hold 100 per cent stake in SOEs, except for those that operate in essential fields such as oil and gas, gasoline and public transportation, suggesting that the State should reduce its stake in less essential fields by selling shares to the public.
In a recent report , VAFI mapped out a five-point plan on how to transform SOEs.
Companies that had already established successful equitisation practices should continue to sell shares held by the State to strategic investors or the public to boost their financial capabilities, Hai said.
He also said that the sales might be drawn out depending on the health of the domestic securities market, but the overall process of transforming SOEs into joint stock companies would require only around three years.
"SOEs should release financial reports in the same way listed companies are required to do in order to help relevant bodies oversee their operation. However, SOEs should still be allowed to declare results later than listed enterprises," Hai said.
VAFI also said the establishment of new corporations and economic groups should not be based on administrative decisions that prevented them from improving corporate governance or mobilising capital.
Government agencies should consider allowing efficiently operated enterprises to purchase major stakes in SOEs.
Furthermore, companies operating in the field of public work should be equitised while being required to bid for contracts involving the implementation of infrastructure projects.
"Those companies should not operate under the SOE model," Hai said.
In a statement, VAFI also pointed out several basic differences between Viet Nam's SOEs and those in other countries in terms of capital mobilisation, financial transparency and declaration.
Viet Nam's SOEs are allocated with capital from the State budget as they are not allowed to mobilise capital by selling shares while large foreign SOEs are allowed to offer IPOs and mobilise capital from both private and State shareholders.
Regarding transparency and declaration, Viet Nam does not have a mechanism to force SOEs to declare financial statements on their websites or in the media, except for financial and banking institutions. Meanwhile, SOEs in other countries are under an obligation to declare their financial situation frequently and sufficiently while being supervised and quizzed by shareholders.
The decision-making process is also different in Viet Nam because important decisions in domestic enterprises must be approved by the relevant State bodies. However, in other countries, the State may act as the major shareholder, but has to answer to smaller shareholders who still have the right to veto unprofitable decisions.
According to VAFI, those differences have caused domestic SOEs to work ineffectively, and are the reasons behind the need for reform.
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