is a valuable lesson for Vietnam to learn. As for the experience in management and supervision policies of VNN in privatization and diversification of SOEs in Hungary, it is a lesson for the equitization process of SOEs in Vietnam.
The VNN investment and business model in Singapore has been applied by Vietnam to the VNN Investment and Business Corporation (SCIC) model. This model has been unanimously applied by the Party and the State in our country in the past and is oriented for the future.
In summary, the contents of the Thesis in Chapter 1 are an introduction to the basic theoretical issues on the content of the VNN management policy in equitized enterprises in Vietnam and international experience to create a premise for Chapter 2 to analyze the implementation of VNN management policy in equitized enterprises and Chapter 3 to propose directions and solutions for improvement.
CHAPTER 2
STATE OF IMPLEMENTATION OF STATE CAPITAL MANAGEMENT POLICY IN ENTERPRISES AFTER EQUITIZATION SINCE YEAR1992 TO PRESENT IN VIETNAM
2.1. The process of equitization of state-owned enterprises in Vietnam
2.1.1 Equitization of state-owned enterprises from 1992 to 1998
The process of equitization of state-owned enterprises in our country was initiated from the orientation at the 2nd Conference of the 7th Party Central Committee (November 1991) which proposed the policy of equitization of state-owned enterprises. The Conference Resolution clearly stated that "Converting a number of qualified state-owned enterprises into joint stock companies and establishing a number of new joint stock state-owned companies must be piloted with strict direction and experience must be carefully drawn before expanding within an appropriate scope".
Resolution of the 10th session of the 8th National Assembly on December 26, 1991 on the socio-economic development tasks for the 5 years 1991 - 1995 stated: "Pilot the equitization of a number of state-owned economic establishments to gain experience and have more capital for development".
The objective of equitization to attract more capital for enterprises was affirmed in the Resolution of the 7th Mid-Term National Delegates Conference (November 1994). Next, Resolution No. 10/NQ-TW dated March 17, 1995 of the Politburo on continuing innovation to promote the role of SOEs clearly stated: "... depending on the nature of the type of SOE, a certain percentage of shares will be sold to officials, employees and individuals outside the enterprise".
Implementing the Resolution of the Party, the National Assembly and the Government have issued many Resolutions, Decisions and Directives to specifically define the steps and methods for equitizing state-owned enterprises as follows: Decision No. 143/HDBT dated May 10, 1990 of the Council of Ministers on summarizing the implementation of Decision 217/HDBT dated November 14, 1987, Decrees 50/HDBT dated March 20, 1988 and 98/HDBT dated June 2, 1988 and conducting a trial to continue innovating the management of state-owned enterprises with proposals
piloting the transformation of state-owned enterprises into joint stock companies for a small number of enterprises that meet the conditions and are typical. On June 8, 1992, the Council of Ministers issued Decision No. 202/CT on continuing the pilot transformation of a number of state-owned enterprises into joint stock companies; Decision 203/CT dated June 8, 1992 selected 7 state-owned enterprises under the direction of the Government for the pilot and assigned the task to each Ministry, People's Committee of the province, and centrally-run city to select 1-2 enterprises to pilot the transformation into joint stock companies. Next, the Prime Minister issued Directive No. 84/TTg dated March 4, 1993 on promoting the pilot implementation of equitization of state-owned enterprises and solutions to diversify ownership forms for state-owned enterprises. The Directive pointed out that: equitization has not been closely combined with enterprise restructuring, especially for enterprises facing difficulties; while restructuring, it tends to dissolve rather than apply the form of ownership diversification.
To successfully transform a part of state-owned enterprises into joint stock companies, minimizing economic losses and social fluctuations, the Party and the State have advocated:
- Implement step by step the equitization of a part of enterprises where the State does not need to hold 100% of capital to prevent negativity and promote effective business operations of state-owned enterprises.
- Must pilot, direct closely, and learn from experience carefully before expanding to a suitable scope.
- It is necessary to implement forms of equitization with levels appropriate to the nature and field of production and business; in which State ownership accounts for the controlling proportion of shares.
- Depending on the nature and type of enterprise, a proportion of shares are sold to employees working at the enterprise to create internal motivation to directly promote development and sell shares to organizations or individuals outside the enterprise to attract more capital and expand the scale of production and business.
After five years, the country has successfully piloted equitization in five enterprises belonging to three ministries and two localities ( Table 2.1 ). Those enterprises are:
+ The joint stock transport agency under the Ministry of Transport was converted into a joint stock company on July 1, 1993 with an initial charter capital of 6.2 billion VND. Of which, the state holds 18% of the capital, employees in the enterprise hold 77% and shareholders outside the enterprise hold 5% of the charter capital.
+ Hiep An Shoe Company under the Ministry of Industry was transformed into a joint stock company on October 1, 1994 with an initial charter capital of 4,793 million VND. Of which, the state holds 30% of the capital, employees in the company hold 35.2% and shareholders outside the company hold 34% of the charter capital.
+ The Animal Feed Processing Company under the Ministry of Agriculture and Rural Development was transformed into a Joint Stock Company on July 1, 1995 with an initial charter capital of 7,912 million VND. Of which, the state holds 30% of the capital, employees in the enterprise hold 50% and shareholders outside the enterprise hold 20% of the charter capital.
+ The Refrigeration Electrical Engineering Company under the People's Committee of Ho Chi Minh City was transformed into a Joint Stock Company on October 1, 1993 with an initial charter capital of 16,000 million VND. Of which, the state holds 30% of the capital, employees in the company hold 50% and shareholders outside the company hold 20% of the charter capital.
+ The Animal Feed Processing Company under the People's Committee of Long An province was transformed into a Joint Stock Company on July 1, 1995 with an initial charter capital of 3,540 million VND. Of which, the state holds 30.2% of the capital, employees in the enterprise hold 48.6% and shareholders outside the enterprise hold 21.2% of the charter capital.
Company name
Date of conversion to joint stock company
Charter Capital (million VND)
State
Charter capital structure (%) People
labor in enterprise
Shareholders outside the company
Total
Table 2.1: Charter capital structure at 05 equitized enterprises
July 1, 1993 | 6,200 | 18 | 77 | 5 | 100 | |
Hiep An Shoe Company Ministry of Industry | October 1, 1994 | 4,793 | 30 | 35.2 | 34.8 | 100 |
Food processing company cattle feed - Set | July 1, 1995 | 7,912 | 30 | 50 | 20 | 100 |
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under the People's Committee of the City | 16,000 | 30 | 50 | 20 | 100 | |
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Food processing company Long An Province Livestock | July 1, 1995 | 3,540 | 30.2 | 48.6 | 21.2 | 100 |
Source: Author compiled from reports of the Department of Corporate Finance - Ministry of Finance
After the pilot phase, the production and business of all five enterprises after equitization have made significant progress compared to before the transformation. This has affirmed the role of equitization in the process of reforming state-owned enterprises. At the same time, it also shows the shortcomings that need to be overcome to further promote the equitization process in the coming time such as:
- Because equitization is a completely new issue for sectors, levels and enterprises, propaganda, education and awareness raising work on the implementation of equitization of SOEs during this period has been promoted.
- Equitization of SOEs is an important solution to reorganize, innovate and improve the efficiency of SOEs. Therefore, it is necessary to classify enterprises and clearly identify which enterprises are subject to equitization and which enterprises the State needs to continue to hold to create a basis for organization and implementation in the coming time.
- The handling of financial problems in equitized enterprises has not been guided specifically and clearly, and is still a blank check for enterprises (enterprises must handle them before equitization), causing enterprises to encounter many difficulties or be extremely confused when handling existing problems. Some enterprises have even asked to stop the pilot because for a long time they have not yet established ownership of some assets taken over during the process of industrial and commercial renovation, or cannot handle other financial problems such as: losses, bad debts or stagnant goods, poor quality, etc.
- Asset valuation is heavily subjective to the seller, the State, without considering the needs and interests of the buyer, so it should be included in the enterprise value.
Sell all assets that are not in use or have no profit potential...
- The State's financial, credit, import-export policy mechanism system still discriminates between state-owned enterprises and non-state-owned enterprises. In addition, the State's preferential policies for enterprises and employees in state-owned enterprises implementing equitization are not many, creating a mentality of hesitation and feeling disadvantaged when implementing equitization for enterprises and employees.
Promoting the achieved results and to ensure that the equitization program of SOEs is implemented in accordance with the socio-economic development orientation of the Party and the State, in the conclusion of the Politburo on the 5-year socio-economic development plan 1996-2000 and 1996 (No. 301 BBK/BCT dated September 12, 1995), the orientation for the equitization work during that time was: "Summarizing the experience of a number of equitized SOEs to draw necessary conclusions. Implementing the equitization step by step firmly of a part of SOEs for the purpose of development efficiency and maintaining the socialist orientation. Based on the requirements and economic - political - social benefits, clearly define: The type of SOEs that still hold 100% of shares; the type of SOEs that hold the majority of shares or the controlling share ratio, the remaining shares are sold to employees working at the enterprise or to outsiders to mobilize more capital to create motivation. develop".
Implementing the Party's policies, the Government issued Decree 28/CP dated May 7, 1996 on transforming a number of SOEs into joint stock companies and Decree 25/CP dated March 26, 1997 amending a number of Articles of Decree 28/CP and Directive 658/TTg dated August 20, 1997 of the Prime Minister on promoting the steady implementation of equitization. This is the first legal document that stipulates relatively consistent policies for equitized SOEs. On August 30, 1996, the Ministry of Finance issued Circular No. 50TC/TCDN implementing Decree 28/CP.
The characteristic of equitization activities in this period is that the legality of the SOE equitization mechanism has been enhanced compared to the previous period. Scope and subjects
The equitization process has been expanded. The selection of equitized enterprises is under the authority and responsibility of the Government, not necessarily voluntary by enterprises. Expanding the right to buy shares of domestic investors; Abolishing regulations on mandatory priority procedures in selling shares. Adding the form of equitization of parts of enterprises. Adding regulations allowing enterprises to deduct losses to the State when determining the value of equitized enterprises. Incentive policies for enterprises implementing equitization have been added such as: exemption of registration fees, maintaining preferential credit and export mechanisms for equitized enterprises, allowing equitized enterprises to be exempted from income tax in the first two years, not only when facing difficulties. Adjusting and adding more incentive policies for employees in equitized enterprises such as: implementing a policy of granting employees a number of shares to receive dividends, expanding the right to buy shares on credit at low interest rates with a total amount not exceeding 15-20% of the enterprise value; Implement a policy of severance pay and job loss allowance for employees if the enterprise cannot arrange jobs.
The result was that within just 2 years (from May 1996 to June 1998), the whole country had equitized 25 SOEs (5 times more than the 5-year pilot period). During this period, only 4 enterprises belonging to the Ministry of Transport, Ministry of Construction and the General Post and Telecommunications Corporation were equitized. The local sector accounted for the majority. Ho Chi Minh City led this period with 6 equitized enterprises and Hanoi ranked 2nd with 4 equitized enterprises.
The total initial registered charter capital of 25 joint stock companies during this period was up to VND 245,742 million. There were 5 state-owned enterprises holding controlling shares (over 51%). During this period, there were 8 enterprises that did not sell shares to outsiders (This is the trend of equitization within enterprises).
However, compared to the set target, the progress of equitization of SOEs in the two years mentioned above is still too slow. On the other hand, the process of implementing the policy mechanism on equitization of SOEs issued under Decree 28/CP also shows that there are still many issues that need to be studied for completion.
2.1.2. Equitization of state-owned enterprises from 1998 to present
To overcome the shortcomings and to accelerate the equitization process of SOEs, the Resolution of the 4th Conference of the Party Central Committee (8th tenure) in December 1997 clearly stated the orientation and solutions for equitization of a part of SOEs as follows: " Classify public utility enterprises and business enterprises, identify the list of enterprises that need to hold 100% of VNN; types of SOEs that need to hold a controlling stake; types of SOEs that only need to hold shares at a low level" and "For enterprises in which the State does not need to hold 100% of capital, it is necessary to establish an equitization plan to create development momentum and promote effective business. Amend and supplement regulations, improve the organization of equitization direction at all levels. Pilot the sale of shares to foreigners. Encourage farmers producing raw materials to participate in buying shares in agricultural processing enterprises".
Implementing the Party's policy, on June 29, 1998, the Government issued Decree 44/1998/ND-CP replacing Decree 28/CP dated May 7, 1996. The relevant ministries and branches also issued guiding circulars. In general, this Decree has fundamentally changed the equitization policy mechanism in the direction of: being proactive in implementing the equitization of state-owned enterprises, expanding incentives, creating more favorable conditions, simplifying procedures, ensuring social policies for workers...
As a result, from the time the Government issued Decree No. 44/1998/ND-CP on June 29, 1998 to June 30, 2002, 940 SOEs and SOE units were equitized and ownership changed. In 1999 alone, there were 250 enterprises, 8 times more than the previous 7 years combined. Thus, in terms of quantity, the speed of equitization after Decree No. 44/1998/ND-CP was greatly accelerated. Many ministries, branches, localities, and State-owned corporations have actively implemented it and achieved very encouraging results. Typically: Hanoi, Ho Chi Minh City; the provinces of Nam Dinh, Thanh Hoa, Binh Dinh, Lam Dong, Phu Tho, Tuyen Quang, Quang Ninh, Thua Thien-Hue; the Ministry of Construction, the Ministry of Agriculture and Rural Development; the Maritime, Coffee, Coal, Cement, Textile and Garment Corporations, etc.