Complete Equitization by 2010: A Target That May be Hard to Achieve

Economic difficulties may cause the government to rethink its schedule for equitizing state-owned enterprises. It may take new policies to accelerate the program and bring a business management style to equitized firms.

The government has set a target of equitizing all enterprises by 2010, but this target may not be achieved due to economic difficulties which have affected the stock markets since the end of last year.

So far, about 3,800 enterprises have gone public. Since the beginning of this year, only 30 enterprises have been transformed into shareholding companies as the pace of equitization has slowed down.

Many enterprises, including big ones, could not sell their initial public offering and cannot be converted into public companies, according to Mr. Tran Xuan Ha, vice minister of finance.

The government will continue the equitization of enterprises in the second half of the year with the aim to renovate business management and to adapt new methods, instead of targeting high price per share, according to Mr. Pham Viet Muon, vice head of the standing board of the Steering Committee for Enterprise Reforms and Development.

In this context, the Steering Committee for Enterprise Reforms and Development shall propose to the prime minister some measures to accelerate the equitization of enterprises. Specifically, the shares should not be issued on the market, but sold directly to employees and the investors. The equitization can be done even if the sale is only one percent of total shares.

Equitized enterprises still operate the same way and the management structure is nearly unchanged, especially in the enterprises where the government has a controlling share, according to a survey by the Vietnam Chamber of Commerce and Industry.

The new policies shall be applied so the controlling shareholder can be foreign entities, Mr Muon said. In this way, an equitized enterprise can follow commercial methods of business management. 

The prime minister is scheduled to meet with state owned economic groups and general corporations on the progress of re-organization and reformation of companies to prepare for the national conference on privatization.

The country still has 1,700 enterprises with that are 100 percent owned by the state. Seven are economic groups, 86 state corporations, and 1,100 are independent state companies.

Until the end of last year, total capital mobilized from domestic and foreign sources for short term and long term, and total payables of 76 groups and government corporations was VND 514 trillion (US$31 billion), or 1.36 times equity. This is not high and financial safety of many firms is still not secure, according to the Ministry of Finance.

(Source: SGGP)