Equitisation: a closed door to outsiders
The Ministry of Industry last week officially announced its decision to equitise an additional six state owned enterprises (SOEs) under MoI and in comparison with other ministries and agencies, pace of equitisation of the industry ministry ranks first. But most of the six SOEs will retain more than 50% state equity as is the case with nearly all profitable equitised SOEs.
This runs against instructions of the prime minister in Decision 155/2004/QD-TTg dated August 24, 2004 defining issuance of criteria, classification of SOEs and independent affiliate companies under state owned corporations. According to Decision 155, only SOEs belonging to the list of 25 fields, holding state equity of 20 billion dong or more, paying to the state budget two billion dong or more in taxes for three successive years, the state will hold more than 50% of total stake.
Specifically, on September 24, 2004 the Ministry of Industry issued Decision 99/2004/QD-BCN concerning the transformation of Van Don Plastics Co under Vietnam Plastics Corp into Van Don Plastics Joint Stock Co. Accordingly, Van Don Joint Stock Co will have a chartered capital of 4.370 billion dong of which the state holds up to 50.98%, 43.99% will be sold to employees and only a tiny 5.03% or 219 million dong will be available for external investors. Under Decision 100/2004/QD-BCN dated September 24, 2004, the industry ministry decided to equitise Tan Phu Plastics Co under Vietnam Plastic Corp into Tan Phu Plastics Joint Stock Co. Accordingly, Tan Phu Plastics Joint Stock Co has a chartered capital of 8.7 billion dong of which, however, the state will retain 51% and external investors only 9.32%.
Transformation of Dong Nai Paper Co is even regulated more strictly. Namely, Article 1 of Decision 101/2004/QD-BCN states that “The chartered capital of Dong Nai Joint Stock Co is 23 billion dong, of which the state holds the controlling stake of 51% and the remaining 49% is sold to employees.” Hence, external investors will not have any chance of buying shares at all in Dong Nai Joint Stock Co.
Decision on equitisation of the Transformer Manufacturing Factory into the Transformer Manufacturing Joint Stock Co also closed the door on outsiders. Article 1 of Decision 103/2004/QD-BCN dated September 28, 2004 promulgates that the chartered capital of the Transformer Manufacturing Joint Stock Co is 16 billion dong, of which 51% is held by the state and the remaining stake held by employees.
Another example demonstrates that external investors are left in the cold in the SOE equitisation process of the industry ministry is Decision 97/2004/QD-BCN concerning transformation of Electromechanical Material Co into Electromechanical Material Joint Stock Co. Under this decision, the chartered capital of Electromechanical Material Joint Stock Co is 20 billion dong of which the state retains 51%, employees hold 46.1%, and outsiders a mere 2.9%.
With the aforementioned decisions, if investors attempt to acquire shares, they can do nothing with such tiny stakes in joint stock companies.
Although Decision 155 by the prime minister came into effect, why did the industry ministry still issue decisions running against instructions in Decision 155. According to Do Huu Hao, deputy minister of the MoI, Decision 155 is quite fresh while Decision 125/2003/QD-TTg by the prime minister dated January 28, 2003 defining rearrangement of SOEs under umbrella of the MoI is still effective, so in the interim, the MoI has not adhered to Decision 155. Additionally, Hao insisted that because the financial performance of some SOEs is weak, they would not be able to attract external shareholders. This is also the reason why the industry ministry decided to retain more than 50% state equity, Hao said.
Addressing the aforementioned question, Nguyen Xuan Thuy, industry deputy minister said that equitisation documents of the SOEs were made before issuance of Decision 155, they had no time to change these documents in accordance with Decision 155. Thuy added the prime minister has asked ministries, agencies to streamline rearrangement, and reform of state owned enterprises under the industry ministry in accordance with spirit of the new decision. Thereby, in equitisation decisions in the near future, the MoI will thoroughly follow instructions of Decision 155.
Category: Legal
