Drastic measures needed to boost transport sector SOE restructuring

November 10, 2014 | 15:26
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Minister of Transport Dinh La Thang shared with VIR the latest progress in state-owned enterprises (SOEs) restructuring in the transport sector and the measures to be applied to ensure success of the process.


Minister of Transport Dinh La Thang shared with VIR

What recent progress has been made in the transport sector’s overall SOE restructuring plan?

As of January 2011, the Ministry of Transport (MoT) consisted of 94 SOEs, including four big businesses such as Vietnam Shipbuilding Industry Group, Vietnam National Shipping Lines, Vietnam Airlines Corporation and the Vietnam Railways Corporation. The remaining 90 businesses include 15 corporations operating under the parent company-subsidiary model, 30 companies whose entire chartered capital is owned by their parent companies, three companies belonging to universities, five under the MoT management, 13 under the management of Vietnam Maritime Administration and 24 remaining belong to the Directorate for Roads of Vietnam. During 2011-2013, the MoT had equitised 54 businesses, including 10 corporations, reaching the planned target. As scheduled, during 2014-2015, the MoT will further equitise the remaining SOEs in which the state does not need to retain 100 per cent capital.

Twenty-seven SOEs are bound to be equitised this year. By end of October 2014, the MoT had founded 27 SOE equitisation steering committees, approved enterprise evaluations for the equitisation of 25 businesses and given the go-ahead to 17 businesses.

What are the main difficulties MoT businesses are facing and how has the MoT helped them tackle the hardships?

Businesses under MoT management are encountering numerous hardships in production and trading in the current period. Many of them report high debt/equity ratios surpassing the regulated levels. They also face high loan rates. Some have carried out ambitious expansion plans while management capacity remains limited, which has resulted in poor business performance. Many are on the verge of going bankrupt.

The stock market has not yet revived in a sustainable manner, meaning firms find it hard to raise capital from the stock market.

Some mechanisms and policies on equitising SOEs are also not being amended fast enough to meet the requirements of these SOE.

In the past three years the MoT has required businesses to develop restructuring plans based on the state not retaining a controlling stake, whilecalling potential investors to act as strategic partners to ensure success at equitisation.

We have made great efforts to help business leaders and workers recognise the need for equitisation to boost competitiveness and operational efficiency. In certain cases, we will decide whether to sack poor leaders or add to the management of firm that are struggling to implement the restructuring process.

During implementation, the MoT has instructed agencies to closely co-operate with consulting organisations and businesses in recommending solutions or report to the prime minister to ensure timely revisions of policies and mechanisms to help firms remove difficulties and push forward restructuring process.

The MoT has urged firms to review their investments and divest from non-core areas or poorly faring units to improve finance and boost effectiveness, making them more attractive to investors.

Quite a few SOEs undergoing equitisation were accused of taking short-cuts. What the MoT will do to curb the situation?

Based on SOE classification list enacted by the prime minister, in respect to SOEs that the state does not need to take controlling stake when equitising, the MoT has required firms to draft their restructuring plans. They can sell all the state capital if investors have are interested.

Potential investors are encouraged to participate as strategic shareholders in SOEs. This is the way to go to equitise firms in a sustainable manner, allowing investors to have more of a voice in business governance.

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