Strategic investors key to SOE reform
HA NOI — "Although more than 1,500 State-owned enterprises have been equitised over the past 10 years, further efforts should be made to bring in strategic investors, an important factor for equitised businesses’ success," said Ly Tai Luan, President of the Viet Nam Union of Financial Investors (VAFI), in a letter to the Central Steering Commit for Business and Development last week.
In the letter, Luan reminded the committee and other policy makers of strategic investors’ large financial resources, advanced technology, management skills and market shares, which joint-stock businesses need in order to develop.
Unfortunately, very few equitised enterprises have definite plans to attract strategic investors and, as a result, strategic investors have been involved in less than 5 per cent of equitisations, Luan said.
He partially attributed this to current policy that governs the sale of stocks of equitised enterprises. Only employees, outside individual investors, individuals of other organisations with connections to the enterprises, some rarely invited foreign investment funds, and a few foreign customers were given the option of buying limited shares, whereas the partnership of local and foreign legal entities in the same sector, which are mostly strategic investors, is ignored.
Another regulation, which says that the State is to hold 51 per cent of the shares in any enterprise that makes an annual profit of VND5 billion regardless of profit margins and economic sectors, has also hindered the participation of strategic investors. Such a stipulation leaves them little room to gain influence in equitised businesses that operate in industries where they have experience, know-how and market share.
Luan called for changes in inconsistent stock sale limits. Under current regulations, foreign investors are allowed to buy up to only 30 per cent of the total shares of an equitised company, as long as it is not of strategic importance to the country, while the Foreign Investment Law allows similar private companies to be fully owned by foreign investors.
"Auction sales of stocks is another disincentive for strategic investors because they can hardly buy enough shares needed to put their plans into action," Luan wrote.
The biggest hurdle, though, was leaders of State-owned enterprises registered for equitisation who advocated a high proportion of State shares in joint-stock businesses in an attempt to retain their top positions and benefits.
Addressing these problems, Luan suggested that the State should keep the dominating share only in highly sensitive economic sectors that have decisive influence on the national economy.
As for enterprises and corporations in other sectors the State should hold less than 30 per cent of their registered capital to ensure a balanced shareholding structure that would attract and make full use of strategic investors, Luan said.
It is not necessary for enterprises owned by the ministries or provincial People’s Committees to retain a dominating State’s share. Luan underlined that strategic investors should be invited to join the enterprises to ensure integrity, professionalism and economic effectiveness.
Toward this end, he noted, the sale of stocks to strategic investors should be regulated to enable businesses to secure strategic investors. — VNS
