Profits create new impetus for SOE equitization

Vinaseed’s revenue increased considerably after the company’s equitization

A Ministry of Finance report compiled in 2015 based on the business results of more than 300 SOEs shows that their annual pretax profits, tax payments, chartered capital, total assets, revenue, and per-capita worker incomes following equitization increased compared with the pre-equitization period.

The Vietnam National Seed Joint Stock Company (Vinaseed), for example, has increased its annual revenue by 20 times, annual profit by 40 times, total assets by 22 times and equity by 40 times. The Vietnam Dairy Products Joint Stock Company (Vinamilk) is another example. Its annual revenue has increased tenfold, tax payment was up by six times, and equity by 13 times.

In 2017, reports by 294 equitized SOEs showed that their assets totaled nearly VND543.86 trillion, up six percent compared with 2016; their equity totaled more than VND210.03 trillion, up 14 percent; total revenue reached more than VND482.54, up 21 percent; and pretax profits totaled more than VND36.63, up 11 percent.

These data reflect the stable growth of SOEs after equitization. The equitization of SOEs has also created the first source of commodities for the Vietnamese securities market.

Equitization has been a major solution to reorganize and restructure SOEs. Prime Ministerial Official Letter 991/TTg-DMDN indicates that 127 SOEs will undergo equitization in the 2017-2020 period. Major SOEs under the Ministry of Industry and Trade, Hanoi and Ho Chi Minh City have already been equitized.

Dr. Nguyen Dinh Cung, Director of the Central Institute for Economic Management, said that the restructuring of SOEs requires them to operate according to market rules and enhance management efficiency by applying international standards and good international practices.

Dr. Cung emphasized the necessity of ensuring the quality of equitization rather than focusing on quantity, adding that the principle of equitization is restructuring the investment portfolios of SOEs to make them stronger.

According to the Ministry of Finance’s Department of Corporate Finance, the equitization process of SOEs needs to be publicized to ensure its transparency, and equitized SOEs must operate according to market mechanisms to create higher added value.