Resolution No. 15/NQ-CP has demonstrated the determination of the government, ministries, sectors and localities to promote the equitization of state-owned enterprises. Since the beginning of 2014, the Ministry of Transport has continuously conducted IPOs of corporations in the sector, the Ministry of Construction has also promoted IPOs of enterprises managed by the ministry. Localities have also promoted the equitization of state-owned enterprises. Specifically, Ho Chi Minh City has developed a plan to equitize 29 large enterprises. On March 13, 2014, leaders of 29 enterprises signed a commitment to complete equitization before December 2015. Hanoi City has also set a target of arranging the equitization of 27 enterprises under the city's management in 2014. Of which, 11 enterprises and 9 enterprise divisions will be equitized.
In the period 2011-2015, the equitization process was slow due to many reasons such as:
The thinking on equitization has not changed when it is still believed that state-owned enterprises must play a leading role, if the number of state-owned enterprises is reduced, it will reduce the leading role of state-owned enterprises in particular and the state-owned economic sector in general. On the other hand, some state-owned enterprise leaders still have the mindset of worrying about losing or reducing control over the enterprise when transforming into a joint stock company, so they have not focused on equitization, proactively slowing down the equitization process. The heads of enterprises are the ones who have the right to decide on the determination to equitize or slow down the equitization process. At this stage, they have more reasons to mention about difficulties, obstacles, and issues that need to be considered to delay the equitization time such as economic downturn, the stock market has not improved, the issue of enterprise valuation, etc. The mentality of business leaders is not a new problem and this problem does not only appear in Vietnam.
Mechanisms and policies have not been issued in a timely manner. Enterprises equitized during this period are mostly medium, large and very large enterprises. This scale makes equitization activities complicated, especially in enterprise valuation. Economic groups and corporations are forced to restructure before equitization, such as rearranging production, restructuring business lines, divesting capital from non-core business lines, restructuring organization, apparatus, staff, labor, etc. However, legal documents are not issued in a timely manner.
causing businesses to be confused in their progress. This slows down the equitization process.
Maybe you are interested!
-
The Process of Equitization of State-Owned Enterprises in Vietnam -
Perfecting the process and organization of internal audit apparatus in Vietnamese state-owned commercial banks - 20 -
State management of enterprise equitization in Hanoi city - 2 -
Perfecting the state capital management policy in state-owned enterprises after equitization in Vietnam - 22 -
Accelerating the Equitization of State-owned Commercial Banks to Increase Flexibility and Efficiency in Banking Operations.
The macroeconomic situation fluctuated strongly, the stock market was unfavorable, and the stock bubble burst in 2008 affected this period. The macroeconomic situation was unfavorable, and the economic downturn greatly affected market demand, thereby affecting the IPO of equitized enterprises. On the other hand, during this period, the Government and ministries focused a lot of efforts on stabilizing the macro economy, which also affected the efforts to implement equitization and the progress of equitization.
3.1.4. Evaluation of the entire equitization process to date
In general, the equitization of state-owned enterprises since 1990 has achieved certain results: The total number of equitized enterprises by the end of 2013 was 4,065, and by September 2014 it was 4,136, including 3,650 enterprises and 415 enterprise divisions. The number of 100% state-owned enterprises by the end of 2013 was 949. Thereby, state-owned enterprises have focused more on key and important sectors and fields that the state holds.
Mechanisms and policies on equitization continue to be improved in a way that facilitates enterprises' implementation. The equitization process has created many positive impacts on equitized enterprises and the entire state-owned enterprise sector.
For businesses, equitization brings more dynamism and initiative in management and operation, improving productivity and operational efficiency.
For the state-owned enterprise sector, equitization has significantly reduced the number of 100% state-owned enterprises, from 12,000 state-owned enterprises in 1990 to 909 enterprises at the end of 2013. Thereby, the influence of the state-owned enterprise sector has been narrowed, economic resources have been reallocated, and some resources from the state-owned enterprise sector such as finance, credit, human resources, land, etc. have been transferred to the domestic private enterprise sector and the foreign-invested enterprise sector for more efficient and effective use. Thereby, conditions have been created to promote the participation of the two domestic and foreign private economic sectors in economic development.
national economic development. It can be seen that although the proportion of the state economic sector in GDP decreased from 40% to 28%, with the stronger growth of the domestic private economic sector and foreign investment, the economy still ensures a fairly high growth rate.
However, compared to the set plan, the equitization process of state-owned enterprises is still generally slow. In the period 2002-2010, the number of state-owned enterprises equitized was only 1/3 of the set plan. In the period 2011-2015, according to the plan, 531 enterprises had to be equitized. However, in the period 2011-2013, only 99 enterprises were equitized, accounting for 18.6% of the plan. So in 2014-2015, the remaining 432 enterprises had to be equitized. Thus, from 2011 to the end of September 2014, the equitization of 170 enterprises only reached 32% of the plan for the period 2011-2015. Assessing the 432 state-owned enterprises that must be equitized from 2014 to the end of 2015, Mr. Tran Van Dung - Chairman of the Hanoi Stock Exchange said: "That is a big goal, requiring a lot of effort and creativity to implement. Accordingly, along with having appropriate policies on valuation of state-owned enterprises, handling the regime of employees, in my opinion, it is necessary to diversify the forms of selling capital of state-owned enterprises and build a reasonable selling roadmap, suitable to the needs of the market. Another important point that needs to be noted in equitization is that the goal of popularizing state-owned enterprises is of primary importance, so we should not focus on selling at any price, but should respect the law of supply and demand and let the market determine the buying and selling price.
The goal set for this stage cannot be achieved when the enterprises that must be equitized are all large enterprises, and the valuation, handling of surplus labor, handling of tax debts, etc. are very complicated. The difficult economic situation and the stock market that has not recovered have negatively affected the sale of shares to the outside. In addition, state-owned enterprises themselves have not really made all equitization processes transparent, so investors are still hesitant when deciding to invest. On the other hand, although they have been equitized, state-owned enterprises still want to maintain their dominant position in the economy.
A part of state-owned enterprises after equitization have not yet escaped the centralized bureaucratic mechanism of finance, organizational structure and management mechanism, that is, enterprises have not really operated in accordance with the objective laws of the market economy.
Minority shareholders in joint stock companies have not really played their role as owners. Minority shareholders such as employees still have the mindset of “working for a salary”; while minority shareholders outside are only interested in dividends and stock prices on the market. Therefore, the positive impact of new factors on corporate governance has not been promoted.
The major limitations in the equitization process are:
First, equitization policies and procedures are still based on old thinking.
From the stage of valuing enterprise assets to organizing management after the enterprise has been equitized, there are many problems. The handling of financial issues before, during and after equitization still has many shortcomings such as: Determining the value of the enterprise for equitization is not correct, causing loss and waste of state assets during and after the equitization process. The value of the enterprise is determined low, most of the shares fall into the hands of a group of people. In addition, there is the situation of collusion and fraud in bidding. The handling of outstanding debts is difficult and time-consuming due to the lack of close coordination and synchronization between banks, tax and finance. The quality of enterprise valuation by many organizations providing value appraisal services is of low reliability. The regulations for selecting and supervising consulting and determining enterprise value have not been clearly defined, and the responsibility of consulting and valuation organizations for selling shares has not been attached. The equitization process from project development to implementation is not close to reality, still cumbersome and complicated, so the equitization time is prolonged. On average, the equitization time of an enterprise takes 437 days, and a corporation takes 554 days. After equitization, many enterprises still operate as before, state management still controls all activities, even for enterprises in which state capital is less than 30% of charter capital. The old management apparatus in many enterprises still holds 80%.
Second, the speed of equitization is slow.
The equitization process is taking place slower than required due to both objective and subjective reasons such as the impact of the global economic crisis and
The difficulties of the domestic economy have affected the financial and securities markets and the plans to sell shares to the public of equitized enterprises as well as divestment. Some ministries, localities, economic groups and state-owned corporations have not directed strongly and actively to organize and implement the plans for arrangement, equitization and divestment. The subjects of arrangement and equitization are currently mostly large-scale enterprises with wide scope of operations, multi-industry business, and complex finances, so it takes a lot of time to prepare and process. The implementation of equitization of large-scale enterprises requires the participation of many large investors with financial potential and good management and investment capacity. Along with that, there have been no clear changes in reducing the number of management agencies of state-owned enterprises. The transparency of information of state-owned enterprises remains stagnant. Information on the operations of state-owned enterprises is only known very slowly through the Government's summary reports instead of detailed financial reports like listed enterprises. Some ministries, branches and localities have not yet resolutely restructured state-owned enterprises, so there are still delays.
Third, Corporate governance after equitization is ineffective.
Equitization diversifies ownership and reduces the dominance of state ownership. Equitization transforms state-owned enterprises into joint stock companies with modern governance structures. After equitization, corporate governance continues to be improved in a modern direction. However, in reality, corporate governance in enterprises after equitization has generally not changed much. Many enterprises still apply the governance methods and measures of previous state-owned enterprises. Although the enterprises themselves have completed equitization, they do not realize the importance of changing the governance model as well as the mentality of "fear of change" and "dependence", so they still stereotype the old governance model. This is explained by the fact that most of the management positions such as director, deputy director and chief accountant are still held by the same people. Most of the shares of other important positions are also held by people inside the enterprise. It is inevitable that "old people" with "old mentality" are slow to change.
Although there are businesses that have implemented and applied new management processes and methods, the approach is still heavily formalistic and does not focus on practicality.
real quality. Not all businesses fully apply the process of strategic planning such as market research, assessment of economic factors, analysis of strengths and weaknesses of the business, drafting of strategic plans, ... or not all businesses fully implement the process in human resource recruitment activities, ensuring full implementation of benefits for employees .... The first reason is that businesses only do it for the sake of form, beautifying the image of the business to attract shareholders to invest, not for the purpose of improving the real quality of management for the business. The second reason is that the processes and requirements of administrative activities are strict and complicated, requiring a lot of time and effort to implement, causing some companies to have to remove some content to simplify the process, leading to formality. In addition, the financial factor is also a major obstacle for businesses. No longer receiving state support or financial incentives, not all businesses are willing to spend a large amount of money (investigation, planning, implementation, control, etc.) to ensure the quality of management activities. In addition, weak management experience is also the reason why management activities in businesses are only at the "surface" level and have not really gone into "depth".
Management activities have not shown newness, creativity and science. The reason is that the management apparatus of enterprises is mostly old individuals with old ideas. In addition, enterprises do not have the habit of hiring management consultants and talented managers, which has somewhat reduced creativity, thinking and objectivity in business operations, especially for basic management activities such as strategic management, financial management and human resource management.
Management activities are still limited partly because enterprises previously received too much support from the State, so after equitization, the change of leadership positions, the removal of legal and financial privileges also caused the management capacity of enterprises to decline. Specifically, because they are no longer in the State economic sector, enterprises have difficulty in borrowing capital to invest and expand production and business due to concerns from commercial banks. The State can no longer guarantee debts for these enterprises, and when these enterprises encounter difficulties in production and business, it is very difficult.
to receive bailout packages as well as additional capital measures from the State. Due to their starting point as a State economic sector, the initiative, creativity and working efficiency of some enterprises are not high, leading to difficulties in competing with other equitized enterprises whose foundation is private enterprises. Therefore, many enterprises are struggling in the current fierce competition.
There are still difficult problems that need to be solved such as surplus labor, skilled labor changing jobs, and long-term labor with low efficiency. The cause of this problem is that the salary and reward policy is still limited, not creating stimulation and attraction for workers, and not strictly using the capacity factor and actual work efficiency of workers.
There are many reasons leading to this situation such as:
- Incorrect or even distorted perception of corporate governance, considering improving corporate governance as improving production and business management such as improving financial management, human resources, salaries, commercial production, etc. Meanwhile, improving corporate governance is applying modern corporate governance principles according to market economy practices. For example, according to OECD rules, it is to create conditions for shareholders to exercise their rights and protect their rights; treat all shareholders equally, including minority shareholders; stakeholders have access to appropriate, complete, reliable, timely and regular information, increase transparency and disclosure of important corporate information, increase the responsibility and accountability of the Board of Directors, ensure that the Board of Directors operates in the best interests of the enterprise and shareholders.
The way the state management agency uses its power over its capital in an enterprise is not in line with the nature of the representative of the capital contribution. The old thinking about administrative management of state capital has not yet been broken when in state-owned enterprises, the state still holds the controlling stake. The representatives of state capital are often administrative agencies, so they tend to apply administrative management measures to the enterprises they manage. That greatly affects the production and business activities of enterprises because the administrative management thinking is different from the laws of the market economy.
- The State has not paid due attention to enterprises after equitization and their corporate governance. The State only focuses on enterprises with 100% state capital and through equitization solutions. There are many documents issued to implement equitization. On the contrary, there are very few documents guiding and directing the implementation to improve corporate governance in enterprises with dominant or controlled shares of the State in the post-equitization period. The task of innovating corporate governance according to market economy practices has become an urgent issue after Vietnam joined the WTO in 2007. However, there have been no issuance of guiding documents and implementation has been very slow.
- Measures to restructure state-owned enterprises are still biased towards enterprises with 100% state capital, not focusing on measures to reform enterprises after equitization, especially enterprises with state control. Ministries, branches, People's Committees at all levels and state-owned enterprise reform agencies are only interested in plans to arrange, equitize, assign, sell, contract, and lease, but have not paid attention to enterprise governance after equitization, management of state capital, especially enterprises with state control.
Fourth, lack of strategic shareholders
When conducting equitization, finding strategic shareholders is a necessary step. These are investors who are capable of filling some of the shortcomings of state-owned enterprises before equitization such as weak management and operation capacity or bringing breakthroughs to the enterprise in technology, market, etc. Enterprises lack strategic shareholders due to:
- Enterprises are equitized according to internal mechanisms, with dispersed shares, lack of concentration, and lack of major shareholders. This situation occurs in the early stages of equitization with small-scale enterprises. Up to now, this form of equitization has been gradually overcome.
- The State holds the controlling stake, so the control, power and controlling characteristics of the State shareholder have prevented the participation of strategic shareholders. When investors realize that they have no position or voice in the enterprise they invest in, it is difficult for them to participate in sharing ideas, management methods and investment activities.