Issues arising from SOE equitisations

Government requirements for state-owned enterprises (SOEs) to go public in Vietnam have contributed to the country’s economic growth, but it is critical to ensure the process is carried out effectively. Evaluating enterprise assets is the first major concern. The evaluation must adhere to market prices by holding a public and transparent auction to define actual value. State assets and property should not be bartered away.

Another issue is that the process aims to diversify capital ownership at the SOEs, preventing the case that some individuals to turn into billionaires after buying state property.

Cases like the Banh Tom Ho Tay company and the Phu Gia hotel in Hanoi should not be repeated, where the total value of the two State-owned enterprises was evaluated to be lower than even the price of their land premises.

The process of selling off state enterprises should avoid the problems that plagued Russia during their period of reform to a market economy, which had since the past decade created a new class of billionaires, whose total property has accounted for 40 percent of the country’s gross domestic product (GDP).

SOE employees should become stakeholders and have the right to take part in business and development schemes of companies that go public.

Setting aside a quantity of preferential shares for the staff of an SOE is necessary, with shares evaluated in line with their market price.

This would help reduce the sale of preferential to outside individuals, allowing them to be major shareholders.

The process of state owned enterprises going public must also be expedited, to increase the pace of bourse listings, and thus increase the liquidity of the domestic securities market.

Another pitfall is to ensure that fundamental administrative changes occur in the new shareholding company to adopt a market-based strategy and a focus on the role of stakeholders.

A final focus lies with state management agencies [ministries, provinces and cities] by reducing their discrimination of choosing to use state-owned companies versus those in the private sector.
This will contribute to create a level playing field for all businesses, including those SOEs that go public.

Source: Thanh Nien