Mar 17, 2013

Vietnam - SCIC’s role in state invested enterprises dim and unclear

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VietNamNet Bridge – Holding a huge asset of the state, contributing capital into many big enterprises and considered the biggest and most powerful investor in Vietnam, the State Capital Investment Corporation (SCIC) has been playing a very dim role in the businesses.

Insisting on escaping from SCIC

The An Giang Plant Protection JSC (AGPPS) has been following necessary procedures to leave SCIC to be put under the management of the An Giang provincial people’s committee.

Once the procedures get completed, the 26.12 percent of stakes SCIC is holding in AGPPS would be transferred to the An Giang provincial people’s committee.

The transfer has been commented by analysts as a step back of SCIC, which shows the big disadvantage of the state’s capital investment model.

When asked why AGPPS has been insisting to come back to the former governing body – the An Giang people’s committee, Huynh Van Thon, Chair of AGPPS, said that he hopes to receive more timely and quickly instructions about the agriculture production programs from the committee.

Established in 1993 as a state owned enterprise, AGPPS got equitized in September 2004, when the state’s capital was transferred from the An Giang provincial people’s committee to SCIC. In September 2010, AGPPS increased its chartered capital from VND270 billion to VND310.5 billion, after which the SCIC’s ownership ratio reduced from 30 percent to 26.12 percent.

In 2011 SCIC began taking actions to gradually withdraw the state’s capital from AGPPS, when the company tried to expand its business to the production, processing and trading rice.

AGPPS, without the active support of SCIC, has fallen into big difficulties. The group of three foreign investors, including VinaCapital, Vietnam Holding and Duxton rejected all the plans suggested at the 2012 shareholders’ meeting.

The plan of SCIC to withdraw capital from AGPPS then raised a question, because agriculture production is considered a “sensitive” sector in an agriculture country like Vietnam, while AGPPS is the target of many foreign investors. Is this because SCIC is not capable enough and doesn’t have enough qualified officers to supervise the use of the state’s capital in the enterprise, or doesn’t it have the vision for long term business strategy?

At first, SCIC’s representative contributed many ideas to the enterprise’s business plan. However, the role of the representative got dimmer later. The enterprise could not make decisions right at the meetings, because it needed to get the approval from SCIC. Finally, the An Giang provincial people’s committee has asked to let AGPPS come back.

SCIC is the messenger?

SCIC is now a big shareholder of Vinamilk which holds 45.05 percent (375 million shares) of total stakes of Vinamilk.

A senior executive of Vinamilk complained that Vinamilk has to consult with SCIC on everything, while the answers from SCIC sometimes are inconsistent, which delay the company’s business plans.

The representative of SCIC at Vinamilk now only acts as the messenger, while he cannot make any decision. Since SCIC is a big shareholder, Vinamilk has to ask for the permission of SCIC, SCIC has always been very slow in making decision.

SCIC, as a big shareholder of Vinamilk, should be on the side of the enterprise and discuss the ways to make profits. However, in many cases, the SCIC’s representative identifies the role of a shareholder with the role of a state management officer, thus being the hindrance to the business’ development.

Nhi Anh

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