Tens of trillions of dong of state capital nearly lost in equitization

According to Tran Dinh Thien, the number of SOEs has decreased significantly over the last 15 years of restructuring, from 6,000 in 2001 to 700 in 2016.

The equitization has led to a significant decrease in the number of business fields in which the State invests. In 2001, SOEs were operating in 60 business fields, but the figure has dropped to 19. This has given more ‘space’ and opportunities to the private sector to make investments.

With 508 out of 530 SOEs planned to be equitized in 2011-2015 and 96.5% of them completing equitization, the results appear positive, but economists say there are many problems.

Thien pointed out that though a high number of SOEs have been equitized, only 8% of the state capital has been transferred to the private sector. As such, one of the goals of equitization – relocating resources from ineffective to an effective sector – remains unattainable.

Though a high number of SOEs were named on the list for equitization, the proportion of the state’s capital put up for sale was modest. In most cases, the proportion was lower than 49%, and the state still held a controlling stake after equitization.

Since private investors cannot obtain a high proportion, they cannot join the board of management of equitized enterprises. This explains why private investors are not very interested in buying SOEs.

An analyst commented that one of the most important goals of equitization is changing the ownership structure and, therefore, changing the way of management. 

If the State still holds a controlling stake in equitized enterprises, the equitization will have no significance, and corporate governance will not improve, because the enterprises still remain state owned.

The analyst also pointed out many technical problems during equitization, estimating that trillions of dong worth of state capital was lost. 

This was attributed to errors in enterprise valuation caused by problems in the legal framework, unreasonable valuation methods, and the low qualification of officers.

According to Nguyen Anh Tuan of the State Audit, after auditing eight enterprises, the State Audit found that the actual state capital value must be VND4.59 trillion higher than the initially reported figure. 

Meanwhile, the gap was VND2 trillion at PetroVietnam Power. In two other enterprises, if applying the DCF (discounted cash flow) method, the value of enterprises would be VND15.69 trillion higher.