Vietnam urged to speed up equitization process

The business community and foreign investors have continuously urged Vietnam to speed up the equitization which has been slowing down in recent years.

Senior executives of ST Telemedia, a subsidiary of Singaporean Temasek Holdings has been paying continuous working visits to Vietnam. Its top interest now is the equitization process of MobiFone, a big guy in the telecom industry in Vietnam.

Several days ago, speaking at the Vietnam Business Forum (VBF), working groups also expressed their concern over the slow equitization process in Vietnam.

Dominic Scriven, Head of the Capital Market Working Group of VBF said that the government of Vietnam needs to speed up the program by setting up a new roadmap with clear criteria and detailed timetable. He went on to say that though the stock market has been stagnant, it still needs good commodities to attract investors, both foreign and domestic.

The equitization process has been slowing down since 2008, after a period of gearing up. Dau tu has quoted the report by the Ministry of Finance as showing that in 2011; only 144 more state owned enterprises went equitized. Meanwhile, a lot of IPO (initial public offering) either have failed, or have been delayed, since the offered prices were much higher than the expected prices.

In the report presented at the mid-term CG (Consultative Group) meeting held in Ha Tinh several days ago, Deputy Minister of Planning and Investment Cao Viet Sinh admitted the equitization process has been going more slowly than required. It is because the enterprises equitized recently have big scale, which makes it more difficult to valuate enterprises and solve relating problems.

Regarding the IPOs, Dominic Scriven said that valuation is the problem that all the IPOs of state owned enterprises have been facing so far. Though the enterprise assessment has been carried out through consulting or by independent institutions, the persons who make final decisions are the issuers. In many cases, the decision makers are the government agencies which represent the enterprises’ owner – the state. And problems arise in many cases.

Sellers always like to see state enterprises’ assets highly valuated, while government agencies are always afraid of selling state’s assets cheaply. Mr Scriven believes that the valuation should be undertaken by one or a group of independent valuation institutions who have understand the market well.

The equitization seems to be prolonged also partially because the stock market still has not shown any signs of recovery. Therefore, a question has been raised that if Vietnam really needs to speed up the equitization now.

Pham Manh Thuong, Deputy General Director of the Debt and Asset Trading Corporation (DATC) under the Ministry of Finance, said that though Vietnam wants to complete the equitization process soon, he does not think that it is necessary to equitize enterprises at any costs.

“Equitization is just a means, not a target, and it is not a magic medicine for the restructuring of state owned enterprises,” Thuong said. “The pace of the equitization still depends on the market performance”.

An official from the Ministry of Finance also agrees, saying that the number of enterprises to go equitized in the time to come is not high, but these are all big enterprises, including economic groups, general corporations and banks. Therefore, the equitization needs to go in a cautious manner.

The official said that the amendment of the Decree No 109 promulgated in 2007, on turning state owned enterprises into joint stock companies is being considered thoroughly.

According to Thoi bao Kinh te Vietnam, with the equitization process, the number of state owned enterprises has dropped from 12,000 in 1990s to 5655 in 2001 and to 1207 by the end of 2010. – Vietnamnet