According to statistics, by the end of 2006, the country had only 2,176 enterprises with 100 percent state capital totalling nearly VND260,000 billion. To fulfil the equitisation target by 2010, the government will equitise about 1,500 enterprises. By the end of 2010, the country will have 554 enterprises with 100 percent state capital. However, in 2007, only 82 enterprises were equitised, fulfilling 21 percent of the set target.

Inappropriate intervention

The slow progress of equitisation is attributed to barriers from administrative mechanisms. Lawyer Vu Xuan Tien from VFAM Vietnam Consulting Company has identified five major barriers including the improper legal framework for the equitisation process, policies for enterprises, rapid changes in the government’s regulations, difficulties in fulfilling many goals at the same time and the indifference of civil servants to businesses’ difficulties in the equitisation process.

Mr Tien said some senior officials still use their power in enterprises even when they have been equitised. For example, a deputy chairman of central Khanh Hoa province’s people’s committee used his mobile phone to stop a shareholders’ meeting of the Phan Thiet Joint Stock Company, which had been implemented in accordance with the laws. Deputy Chairman of Ninh Binh province’s People’s Committee issued a document aimed at not recognising the results of the shareholders’ meeting of Ninh Binh Pharmacy Joint Stock Company. These are really inappropriate interventions into the equitisation process of enterprises.

Being afraid of losing interest, senior officials cited many reasons for delaying the equitisation process. Currently, the fluctuation in the stock market is another reason which has affected the process. If Initial Public Offering (IPO) is difficult to sell, the equitisation process will be prolonged.

How to solve the problem

Lawyer Cao Ba Khoat, Director of the K & Associates business consultancy Co. Ltd., said that business equitisation is not like a marketing strategy. However, there are some troubles relating to price fixing and payment procedures.

According to Mr Khoat, it is essential to complete legal framework for the equitisation process and simplify procedures. In particular, functional agencies should cooperate closely with businesses to provide instructions and help them deal with problems emerging during the equitiation process so that the process can be implemented in a transparent and lawful manner.

Dr. Pham Sy Liem, Deputy Chairman of the Vietnam Construction General Association, said that in the equitisation process, administrative agencies should function as advisors, instructors and inspectors. They should only get involved in dealing with administrative violations. In addition, disputes and problems relating to asset appraisal and business regulations should be settled by the economic courts which may ask for further assistance from economists. Courts do not have the relationship with business assets that administrative agencies do, and their system is less complicated than the administrative system, he added.

Dr. Liem also stressed that, in any case, it is necessary to ensure the normal operation of businesses which have not yet gone to bankruptcy. Administrative orders should not be made to ask businesses to stop their operation for “consideration”. People who make decisions or give opinions leading to the suspension of business operations will have to face punishment and compensate the business for damage according to ruling of the administrative courts.

In fact, after being equitised, businesses’ registered capital is high, but their circulating capital is very low. Therefore, businesses’ competitiveness in the post-equitisation period is rather weak. To resolve this issue, Mr Khoat said it is important to review the regulations of the State ownership of businesses’ shares (51 percent) to avoid interventions by owners in business operations.

Cao Dang Vinh from the civil law department under the Justice Ministry said that slow equitisation poses great challenges for Vietnam in the current integration process. Nevertheless, at present the legal framework for equitisation is not strong enough because Vietnam has decrees but no laws in this field, thus nobody is criticized when they do not fulfill their tasks./.

Source: VOV