Jan 25, 2013

Vietnam - SOEs fear they miss deadlines for capital withdrawal

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VietNamNet Bridge – Nearly all the state owned economic groups and general corporations have received orders from the Prime Minister on the procedure and deadline to implement the capital withdrawal from non-core business fields. However, they fear they cannot fulfill the duty on schedule.

The Prime Minister has approved the capital withdrawal plan by Vinachem, the chemical economic group. Under the plan, it would have to withdraw all the capital from 13 enterprises, including the big names like the insurer Bao Minh.

Like many other “big guys,” Vinachem also poured money into a finance and a securities company, which was “in fashion” some years ago.

An ultimatum has been released to Vinachem that it must complete the capital withdrawal process no later than the end of 2015.

However, a senior executive of Vinachem said on Dau tu that it is not easy to follow the capital withdrawal roadmap set up by the government, since the current stock market performance does not support the capital withdrawal.

“We have to race against the clock to fulfill the duty on schedule. And we have to ensure that our shares can be sold at the highest possible prices to preserve the state’s capital.

“Though Vinachem’s investment capital in non-core business fields just accounts for only three percent of the total investment capital, we think we still need to report our case to the Prime Minister for instructions,” he said.

A similar proposal has also been made by General Director of the Southern Food Corporation (Vinafood 2) Truong Thanh Phong.

“We have our capital withdrawal capital plan approved already. In fact, our investment capital in non-food business fields is modest, just accounting for one percent of the total investment capital. Therefore, we would like to follow a reasonable time schedule to ensure the highest possible efficiency,” Phong said.

Phong, like the other heads of state owned economic groups and general corporations, fear that if they are forced to speed up the capital withdrawal process, they would have to sell stakes in hurry at low prices, which would lead to the loss of the state’s capital, for which they would have to take responsibility.

It is understandable that the heads of the enterprises don’t want to be urged to sell stakes, because in the context of the current gloomy stock market, it is clear that the shares would not go for good prices.

The one percent of capital Vinafood 2 has to withdraw has been poured into 18 enterprises in many business fields, from finance & banking to insurance, from tourism to sea transport.

Though Phong did not mention the share prices, it’s clearly impossible to sell the shares at the same prices at which state owned groups bought some years ago to break even. The share prices would depend on the health of enterprises and the market demand, not on the enterprises’ willing or the book values.

“Will we be able to sell stakes if the buyers only pay the prices much lower than the book values?” questioned Nguyen Thanh Phuong, Chair of Vinaconex.

Phuong went on to say that it’s nearly impossible to require the same prices of the stakes enterprises bought some years ago, when the stock prices were all sky high in a scorching hot market.

“We have suggested that stakes should be sold at the market prices to ensure the healthy cash flow,” Phuong said.

Regarding the potential buyers, Thoi bao Kinh te Vietnam has reported that the State Capital Investment Corporation (SCIC), a powerful state owned group which specializes in making investment with the state’s money, is considering buying the stakes to be sold by the SOEs which have been forced to withdraw capital.

By the end of 2012, the stockholder equity of SCIC had reached VND27.7trillion dong. One dollar is equal to VND21,000.

Compiled by C. V

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