Apathy in SOE equitisation
State-owned enterprises (SOEs) must be equitised more quickly and subjected to more stringent management to prevent losses to the state, economists and researchers said last week. The pace of equitisation has been too slow, said Dr Truong Thi Minh Sam, deputy director of Vietnam’s Southern Institute of Social Sciences (SISS).
SISS and the University of York (UK) held a seminar on SOE equitisation in HCM City last week.
The drive to equitise more SOEs comes amid the country’s attempts to enter the World Trade Organisation (WTO). The number of SOEs that have been equitised from 1991 to the end of 2003 has reached 1,706, accounting for a third of the SOEs in Vietnam.
The total assets of the equitised SOEs, however, represents only 3% of the state sector.
“We are witnessing a new thinking that criticises the harmful aspects of the way equitisation is being done, and even challenges the very idea of equitation and its policies,” Dr Sam said.
Sam cited the World Bank’s annual report in 2004, which described the selling of shares exclusively among SOE managers and staff as the single most harmful aspect of equitisation. Sam said a survey conducted by a SISS team showed that the value of shares held by lower-level staff was only 17%, although company records said that it was, on average, 55%.
This so-called insider privatisation among SOE managers and staff, Sam said, was once widely viewed as the most ethical means of distributing company assets after equitisation, but the results have been less than salubrious. Ownership is moving into the hands of management, “which has led to social discontent,” said Sam.
“Privatisation has been accompanied by fraud in Vietnam. We need to expose these to the public,” Sam said.
In a March equitisation conference, deputy prime minister Nguyen Tan Dung said: “The buying and selling of shares of equitised SOEs has to be done openly in the market. We have to stop closed equitisation within each SOE”. Many workers have become redundant after their SOE was equitised, SISS found, although data from the companies showed otherwise.
To support workers who lose jobs due to equitisation, Martin Rama, chief economist at the World Bank in Vietnam, said workers should be supported through a Labour Redundancy Fund under a special decree issued by the Ministry of Finance, which calls for substantially more generous salaries than does the Labour Code.
A study by the Labour Redundancy Fund of 2,600 workers randomly selected among those supported by the fund in 2003 revealed that redundant labourers had made good use of the lump sum compensation package and were able to re-integrate into the labour market.
Two-thirds of the interviewees said their living standard had not declined after they were laid off.
Dr Dung the economist said shares should be sold to investors who have good business sense, a move that would lead to better managed and more financially sound enterprises. Dr Dung said it would be fair to sell shares at market prices to the private sector and use the money to help re-train replaced workers to help them find new jobs.
Prof Mark Evans from the University of York (IK), said: “A basic minimum income approach fits the Vietnamese political culture as it is based upon the principle of social equality. “It emphasises social partnership but provides a central role for the state in the allocation of resources; it is simple to administer; and it can be gradually phased in to meet pressing social needs as the transition to a market economy proceeds.”
To overcome the shortcomings in the process of equitisation in Vietnam, Dr Sam proposed that the Vietnamese government stop the current mode of insider equitisation and re-establish the role of independent auditors to value SOEs’ assets, and to have share bidding done by public auction.
Dr Sam also asked the government to select equitised SOEs that are profitable and competitive as good examples of companies in which the workers are the true shareholders.
Category: Legal
