The number of equitised State-owned enterprises (SOEs) each year has been on the rise since 2011, but those in need of equitisation, including large economic groups and corporations, remain enormous, Nhan Dan (People) newspaper reported.

As Vietnam seeks to restructure its economy and shift from extensive growth to intensive growth, maintaining quality when equitising a large number of SOEs is a significant challenge.

According to a Government plan, 432 SOEs are to be equitised in the 2014-2015 period. The number of enterprises having completed equitisation in 2014 was 143, leaving 289 enterprises pending equitisation in 2015, a number significantly higher than in previous periods.

In addition, the quality of performance from equitisation remains an issue. The performance of equitised enterprises can be improved only if there are innovations in corporate management and participation of strategic shareholders in large economic groups and corporations.

However, corporate governance has not seen much change in SOEs-turned-joint stock companies, especially in enterprises where the State still holds a controlling stake. Adequate attention has not been paid to post-equitisation measures, market principles, accountability and equal treatment to all shareholders.

In addition, for enterprises in which the State holds a controlling stake, it is difficult to find strategic shareholders who are capable of addressing existing shortcomings to bring about innovation in technology and market penetration.

As the economy has just begun to recover, demand is rising but at a slow and unsustainable pace. The goal of equitising 289 enterprises in 2015 is a significant challenge on all three indicators: the number of equitised enterprises, implementation progress, and equitisation quality.

There are good grounds for this concern. First, the number of SOEs in the 2015 equitisation plan is much higher than the annual average during 2011-2014 when the economy was in serious slowdown and equitisation was not really beneficial for SOEs and the State.

Second, substantive SOE equitisation requires them to be restructured prior to equitisation, which is absolutely necessary for economic groups and corporations. Much time should be given to restructuring instead of trying to equitise as many enterprises as possible.

Third, what is important to equitised enterprises is not only their transition to joint stock companies, but mainly how to improve corporate governance to increase their competitiveness. This also requires more time and effort during and after equitisation.

For economic groups and corporations operating in important areas, the equitisation process must be selective and implemented in accordance with the specific conditions of the country and the Party’s economic development orientations. Different from other SOEs, the equitisation of these important companies cannot be implemented in a rush, but must follow a multi-stage roadmap with the goal of phasing out the State stake.

A law on SOE equitisation is needed and should have been formulated years ago as SOE equitisation is a major issue affecting State ownership in enterprises and its role in the economy. However, to date no laws or detailed regulations on SOE equitisation have been issued. Meanwhile, the National Assembly has adopted numerous laws on the use of State capital as well as formation, management and organisation of SOEs.

As Vietnam is pushing for SEO equitisation, a law on this process is needed more than ever to create a solid legal foundation instead of applying sub-law regulations to large enterprises such as economic groups, corporations, major companies and companies related to land, security and defence.

Currently restructuring measures are mainly focused on wholly State-owned enterprises while not enough attention is being paid to post-equitisation enterprises, especially ones where the State still holds a controlling stake. In addition, ministries, agencies and province-level people’s committees are concerned with the equitisation process while largely ignoring post-equitisation governance.-VNA