Vietnam - Divestment of State groups and corporations seems difficult before 2015

State groups and corporations in Vietnam will have to finish the restructuring and divestment of non-core investments before 2015 according to the government’s request. However, in the gloomy market context, the divestment seems to be very difficult.

Apart from the deal of EVN to transfer EVN Telecom to Viettel, the capital divestment of groups is not easy because only few buyers are showing up.

Pressure of capital withdrawal

The Electricity of Vietnam (EVN) now has almost 3 trillion dong left of non-core investment in banking, insurance and real estate sectors. In which 114.9 billion dong is in An Binh Commercial JS Bank (ABBank) and 1 trillion dong in EVNFinance Co. excluding real estate and insurance, business in ABBank and EVNFinance Co is profitable.

Under the government’s order, EVN must speed up the capital divestment in all non-core fields due to the shortage of investment and its unbalanced finance status. Till now, in field of banking, EVN has proposed to transfer its 5.3% share in ABBank to HCM City Housing Development Bank (HDBank). Meanwhile, in the property market, EVN assigned the representative right for its capital to realty companies to seek investment partners for transfer, but there has not been any buyer to date.

General Director of Vietnam Coal and Mineral Group (Vinacomin), Mr Le Minh Chuan said that in the forthcoming time, the group will start the capital restructuring at some affiliates to collect capital for major business fields. Now it has transferred its share of 15.66 billion dong in Vonfram Dak Nong, 4.6 billion dong in Ha Tinh Port Joint Stock Co, 7.5 billion dong in Long Thanh International JSC.

Board of directors of Vinacomin also decided to divest all contributed capital of 10.5 billion dong at BIDV Expressway Development Joint Stock Co, 47.8 billion dong in Hai Ha Economic Zone Investment and Development JSC, 50 billion dong in Aviation Insurance JSC, 10.5 billion dong in Trung Luong-Can Tho expressway JSC, and 48 billion dong in Vietnam Investment Fund without awareness of successful transfer time.

Along with the divestment of non-core investment, Vinacomin also is restructuring joint stock member companies namely Dong Ta Phoi JSC, Machinery Manufacturing and Construction Joint Stock Co, Transportation and Miner Commuting Joint Stock Company, Hon Gai Machinery JSC to ensure that the parent company and affiliates do not co-contribute capital in the same enterprises.

The divestment also is a big question of Vietnam Chemical Group (Vinachem). In line with the conclusion of Government Inspection at the group, Vinachem since 2007 has invested 7.5 billion dong in Vietnam Industrial and Commercial Securities Co (VICS), increased its ownership ratio in Vinachem Finance JSC to 39% (surpassing the allowable ratio of 37%). Till now, the group is still managing to reduce the non-core investment ratio and looking for buyers.

Similarly, Song Da Group’s non-core investment has reached over 4.204 trillion dong against its charter capital (parent company) of 3.046 trillion dong, exceeding over 1.158 trillion dong. The investment portfolio of the group includes Vietnam Investment Fund and Vietcombank member fund.

Citing the 2010 fiscal report of Song Da Group, it invested 6.942 trillion dong in external sectors, particularly almost 5.679 trillion dong in its affiliates, 700 billion dong in joint ventures and associated companies, 564 billion dong in other short term investments.

New bottle-old wine

The capital divestment, which seems to be simple, has not been completed. The action is new formally, but actually the quality of divestment is not there. Otherwise, wine (state capital) has been transferred from here to there while the quality of capital is unchanged. This restructuring really is difficult but also facing favourable conditions.

The hard problem in the enterprise restructuring of state groups and corporations will be unexpected affects to employees. The restructuring also aims at changing administration machine and business management in which many leaders have to resign and more talented people will drive business.

VietBiz24

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