“Corporate restructuring” is no longer a new term in recent years as domestic and world economies experienced numerous difficulties. How best to restructure is still a big question for many. Vietnam Business Forum interviewed Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), the national agency representing and supporting the Vietnamese business community for more than 50 years, on this issue. Lan Anh reports.
Vietnam plans to equitise 500 State-owned enterprises (SOEs) from now to 2015 and the remaining 600 in the following years. How do you assess this plan? Will Vietnam be able to achieve its equitisation target by 2015?
The equitisation aims to reform and restructure SOEs to formulate a more level playing field [for enterprises]. However, equitisation speed is still slow because the amount of State capital is quite high. The equitisation is carried out in most areas but it is slower than expected. Specifically, SOE equitisation speed markedly slowed down in recent years, from more than 800 companies in 2004-2005 period to 13 companies in 2012. Many SOEs have been transformed into sole-member limited liability companies or State-controlled joint stock companies, but no regulations on administration for supervision of these typical forms of enterprises have been issued.
In the coming time, Vietnam will accelerate SOE restructuring and equitisation, making SOEs focus on key business fields in a bid to put an end to non-core investment status in the next two years. In 2014 and 2015, approximately 500 SOEs will be equitised, including one economic group, five so-called corporations 91 and most corporations 90.
The SOE reshuffle in Vietnam was said to be more important than the banking system restructuring by international donors. When Vietnam joins free trade agreements (FTAs), SOE restructuring toward greater transparency and modernity is an urgent requirement.
According to the Government’s guidance, in 2014, SOEs must be restructured after restructuring schemes are approved. The State will divest from companies engaged in the fields where the State does not need to hold controlling stake. Loss-making or incurable companies will be let go bankrupt. SOEs must compete equally with other companies to gain access to capital sources and other resources. However, the sale of State capital must be carried out seriously and avoid rampant sale and negligence to prevent loss of State property.
Currently, divestments from non-core businesses are still following market principles, but many issues have emerged in reality. In fact, the pressure of State divestment has intensified at the request of the Prime Minister but many companies find it hard to sell shares in the context of gloomy stock market and economic downturn. Creating transparency and enhancing corporate governance in both the State economic sector and the financial – banking sector will soon bring about results after SOEs in these sectors strip their non-core business, carry out equitisation, restore competitiveness and spur long-term growth.
This tough time is the chance to eliminate weak companies unsuitable with the new economy. When the restructuring is in progress, bankruptcies are normal. We should not feel inhibited when we see the number of corporate bankruptcies because the economic restructuring will end in a failure if weak entities are not removed.
What factors are important to accelerate SOE reform and restructuring?
Although SOE restructuring is one of three core contents of economic restructuring, it is an important knot of this process. If this knot is untangled, it will create conditions for solving two other contents and accelerating the growth paradigm change in Vietnam, stabilising macro economy, and enhancing SOE quality and competitiveness by focusing resources on core business areas, reducing the number of SOEs and increasing SOE quality. In that process, the key of the State is to create a favourable, stable and transparent business environment, ensure equal competition for state and private economic sectors, apply financial transparency and end give-and-take mechanism, as well as State subsidy.
The Prime Minister recently directed that SOEs must be restructured, adding that personnel rearrangement is a determining factor to the success or failure of this reform. If the managerial personnel arrangement is not good, we cannot manage to restructure. Therefore, the Government has advocated firing executives of SOEs which fail to go public. Obviously, with the radical guidance of the Prime Minister and the ruthless determination of State management agencies, the reform process will be more favourable. SOEs can quickly adopt new advanced and efficient governance mechanism.
In fact, in a gloomy business picture, we still see bright spots. Some medium-sized businesses, which have right business strategies, work diligently, focus on core business areas, have no risky investment, adopt good governance, particularly risk management system, diversify markets and integrate with global value chains, still enjoy good growth. These businesses are often led by young well-trained entrepreneurs, who pay special attention to high added value stages in value chains.
I think corporate restructuring should start from that experience. This is the weakness of Vietnamese businesses.
Banks which supply capital for most companies are getting into a predicament. How do you think about the current progress of credit institution restructuring?
Credit institution restructuring is slow and full of difficulties. Bad debts in the banking system are processed slowly. Nonperforming loan ratio remains high.
Expectedly, the Government will continue to sell stake in four out of five equitised companies 2011-2013 to lay the groundwork for the completion of overall equitisation plan set for 2020. By the end of 2014, we will settle VND130-185 trillion of bad debts and will enhance monitoring, examination, inspection and system safety assurance.
Current difficulties have caused many companies to halt or dissolve operations. What supports are deemed practical for enterprises to get out of this situation?
2013 was a hard year for the business community. Many businesses terminated or dissolved operations. Operational enterprises also faced a lot of difficulties and business prospects are worrisome.
The 2013 business movement survey conducted by VCCI showed that the reasons behind most shutdowns of Vietnamese businesses were, first of all, no output markets and then lack of access to loans.
According to some international organisations like the International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB), Vietnam’s economy will show signs of recovery driven by export growth in 2013 and active progresses in macroeconomic stabilisation and SOE restructuring.
So, to actively support the Vietnamese business community, the Government must identify priority sectors in need of growth stimulus and production support to help enterprises to exist and develop; and identify objects and addresses in need of support to ensure effectiveness and avoid opposite effects. It should analyse reasons why companies are still in difficulty and cannot access capital sources, places where the money is flowing, and solutions that need to be taken to address difficulties. It needs to classify businesses to have suitable policies for specific objects, avoid indiscriminate and equilibrium policies. At the same time, it is necessary to handle corporate debts, reschedule corporate debts, and review business capacity to provide suitable loans.
Specially, we need drastic measures to reach a credit growth of 12 per cent, ease fiscal policy and monetary policy to achieve the growth target, remove difficulties against enterprises, reduce unemployment, create new jobs, and especially keep reasonable rates to increase the access to capital sources for the poor and enterprises.
Thank you very much!
Đăng ký: VietNam News