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Billions of dollars worth of state capital ‘buried’ in SOEs

2013-06-10 11:36:58

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The Vietnamese government currently holds the controlling interests at a number of state-run businesses, including those operating in sectors that do not necessarily have to be controlled by the state, such as dairy, confectionary, and fertilizer.

While billions of US dollars worth of state capital has been allocated to such companies, the infrastructure development sector, including construction and repair of roads, schools, and hospitals, has been facing a money shortage.

Many company chiefs and economists have hoped that the government will divest or reduce its stakes at the businesses to make room for other private investors to join, as well as freeing up money to allocate to other public investment, but it seems uninterested in doing so.

For instance, the State Capital Investment Corp (SCIC), which represents the government at Vinamilk, has recently rejected the company’s proposal of the ESOP, or employee stock ownership plan, saying it may “affect the state capital” at the country’s largest dairy producer.

SCIC currently holds a 45.08 percent stake, or 375.73 million shares, of Vinamilk. With each share fetching VND136,000 on June 7, the market capitalization of the government is VND51.09 trillion, or US$2.46 billion.

Similarly, PetroVietnam (PVN), the state shareholder at PV Gas, currently holds a 96.74 percent stake, worth more than VND118.24 trillion, at the company, which has one of the largest market capitalizations listed on the Ho Chi Minh City Stock Exchange.

The state still holds a huge stake in PV Gas, even though it was determined by PVN after the company’s IPO in 2010 that the government should not hold more than 75 percent of the total registered capital.

The government also holds large stakes in several banks, such as Vietcombank, BIDV, and Bao Viet Group, the country’s leading insurance and financial investment firm.

By the end of last year, the total state capital at state-owned enterprises was VND735.29 trillion ($35.35 billion), according to the steering board for business restructuring and development.

Divestment urged

An analyst working at Ban Viet Securities, the stock consultant for PV Gas, said many investors, both local and international, are interested in the company.

Although it has been planned that the government will gradually divest from PV Gas, its current 96.74 percent stake has discouraged investors and left no room for other people to join, he said.

Investors have also failed to join Vinamilk as SCIC refuses to sell its stake, a company chief revealed.

The government currently holds billions of dollars worth of shares at Vinamilk, which would be a huge capital source for other public investment, he said.

“Once the government has divested from Vinamilk, other good strategic investors can join in to boost the company’s business effectiveness,” he added.

Petrolimex chairman Bui Ngoc Bao also said the company wanted to speed up the divestment process of the government, but it depends on how the stock market develops.

“Petrolimex is expected to have 75 percent held by the government, but it’s not easy to sell shares during these hard times,” he said.

Too much to handle

Economist Le Dang Doanh said the government will not be able to handle all of the business when it holds shares in so many firms.

“The government should divest from sectors such as dairy, confectionary, garment, beverage, and fuel, in order to make room for private investors to increase the competitiveness of the market, for the benefit of consumers,” he said.

The state is supposed to hold controlling interests in companies relating to national energy security such as Petrolimex and PV Gas, but the shares do not necessarily need to be as large as 90 percent, or even higher, he added.