State companies to cut investment

State-owned enterprises will be required to reduce investments in non-core lines of business from no more than 30 per cent of equity to no more than 15 per cent, under a draft decree being compiled by the Ministry of Finance.

A number of major State-owned enterprises have invested in high-risk lines of business, including banking, securities and real estate development, with capital investment reaching to trillions of dong.

Electricity of Viet Nam (EVN), for example, currently has about VND3 trillion (US$145.6 million) invested in lines of business unrelated to electricity – or about 3 per cent of its equity. The national oil and gas group PetroVietnam, through its subsidiaries, has also invested heavily in real estate projects and financial institutions.

Firms would be urged to reduce these investments while ensuring the financial security of the enterprises and avoiding losses of State capital.

Viet Nam National Textile & Garment (Vinatex) Group deputy general director Pham Nguyen Hanh said that this was easier said than done in the current economic climate, with the stock market in a prolonged downturn. Enterprises had their hands tied in terms of divesting from these non-core lines of business, unless they were willing to accept losses, Hanh said.

Realistically, the process needed to take place over a long period of time, according to a specified schedule, she added.

Anticipating these concerns, the ministry has suggested that enterprises facing difficulties in divestment should transfer these assets to the State Capital Investment Corporation (SCIC).

Under a pilot prog-ramme that began last month, wholly State-owned enterprises are being required to declare their assets, including fixed assets and working capital, cash on hand and other liquid assets.

The ministry was also drafting regulations to improve corporate responsibility in the management and use of State capital and assets, and these provisions were expected to help business leaders and State agencies more readily detect weaknesses in operations, said Deputy Minister of Finance Tran Van Hieu.

Hieu said the ministry has also proposed that the Government strengthen sanctions on business managers who fail in their duty of financial man-agement.

The draft decree on management and use of State capital in State-owned enterprises is currently being circulated among relevant agencies for comment. If it is issued, it would replace Decree No 09/2009/ND-CP. — VNS

Tags: Vietnam companies, Vietnam enterprises, Vietnam SOEs