On the occasion of the Year of the Horse 2014, Vietnam Business Forum interviewed Mr Lai Van Dao, General Director of the State Capital Investment Corporation (SCIC) on the process of economic reform in general and on enterprises restructuring in particular. It is also considered an important task of SCIC. Duc Binh reports.
On the basis of Government Decree 151/2013/ND-CP and the restructuring scheme of SCIC, how will SCIC promote the sale of capital at businesses operating in the sectors that the State does not need to hold?
Under Decision 2344/QD-TTg dated December 2, 2013 of the Prime Minister on approving the Restructuring Plan of the SCIC by 2015, SCIC will perform divestment at 376 enterprises operating in the sectors the field the State does not need to hold, striving to reduce capital investment portfolio and additional enterprises to about 100. Up to now, the SCIC has sold capital in over 600 enterprises, making nearly VND4 trillion in revenue to the State.
Decree 151/2013/ND-CP stipulates a number of new mechanisms consistent with significant functions of the SCIC including the sale of state-owned capital. Thereby, the SCIC can use several ways of selling capital such as matching, public auction, competitive offer, sale agreements and stock swaps. The Decree also defines that the capital selling by the SCIC in businesses is aimed at equitisation and capital reduction in the sectors the State does not need to hold, which is not selling capital of founding shareholders and not compliant with the provisions of the securities offered to the public.
Besides, implementing the restructuring plan, the SCIC will focus on making and submitting to the Prime Minister for approval the development strategy of SCIC by 2015 with vision to 2020, which clarifies the list of specific sectors or businesses holding or divesting capital in accordance with the guidelines of the Party and the State, the market situation and the actual operation of the business. Specifically, areas of investment of the SCIC include investment in groups, corporations, parent companies of the parent company model operating in key sectors of the economy where the State needs to hold the governance power, investment under the designation by the Government and the Prime Minister in critical areas, and investment in adding capital in enterprises holding capital of the SCIC. The SCIC must spend a minimum of 70 percent of its total investment capital to perform the above investment activities; the remaining 30 percent is spent investing in sectors or projects bringing economic efficiency. Particularly:
Under the restructuring scheme of the SCIC, the key job and investment area categories in the orientation in the model scheme of the Corporation submitted to the Politburo and in Decree 99/2012/ND-CP include finance, energy, medicine, infrastructure and construction, key industries, telecommunications, technology, chemicals, mining, aviation and food. The scheme focuses on reviewing prioritized investment projects in infrastructure development towards 2020 under the approval of the Government.
At the same time, the SCIC is allowed to deploy investment and capital business in sectors bringing economic benefits such as investment in establishment of new enterprises, joint ventures, investment in partial or entire purchase of assets of other businesses, investment through the purchase and sale of stocks, bonds and other financial instruments, linked investment with or entrustment to financial institutions and investment funds, direct or indirect investment to foreign countries, and other forms of investment in accordance with the law.
Under your perspective, what opportunities and challenges 2014 will bring to Vietnamese enterprises? What is the impact of the Trans-Pacific Partnership (TPP) for Vietnamese enterprises once reached?
In 2013, while the world economy slowly recovered, Vietnam somehow achieved important successes in socio-economic development, contributing to the implementation of the objectives of the 5 year plan in 2011-2015. Many important objectives were completed such as curbing inflation, stabilizing macro economy, stimulating growth recovery and ensuring social security. This is a step in the right direction proving the great political determination of the Party and the Government.
In 2014, besides big challenges Vietnam’s economy will still have to cope with, including budgeting, financial market stabilising and real estate market recovering, there are so many opportunities for the economy and the enterprise system.
Particularly, thanks to the determination of the Government in managing the budget, it exceeded in 2013, paving the way for budget balance in 2014. Monetary market operations and fiscal policies are linked more actively, gradually affirming the market mechanism under the socialist orientation. Social security activities are paid more attention to; and international integration gets deeper. Consistent with the direction of the Government to reach objectives of macroeconomic stability, inflation control, not many changes are expected to happen in 2014. In addition, the adjustment of the ratio of share holding of foreign investors in listed companies under the decision of the Prime Minister promises to attract indirect investment flows into businesses, contributing to the flourish of the stock market.
The real estate market will still have to face difficulties; enterprises will have difficulty approaching loans despite lowered interest rate; the restructuring and equitisation of businesses, divestment of non-core investment capital of groups and corporations remains slow; analytical and predicting work is not deep enough; reform of administrative procedures should be made stronger. These are big challenges for Vietnam’s economy.
The SCIC will conduct research more flexibly and proactively and associate with the market to serve as a basis for administration. In addition to the sectors that the SCIC has considered in the restructuring scheme to determine investment and holding objectives, the SCIC will continue to do research in new fields and sectors in accordance with macroeconomic developments and international economic integration progress, including Vietnam’s participation in the TPP Agreement. Some industries are expected to grow in the coming years, in my opinion, including telecommunications, food, medicine and pharmaceutical, mining (deep processing), development of financial and monetary, services and tourism, supporting industries, and the development of supermarkets supplying fresh food and vegetables.
In my point of view, the signing of the TPP agreement will create opportunities for Vietnamese enterprises including the access to major markets in trade, services and investment, expanded import and export activities, the access to purchase imported materials with low cost, positive effects of the reform and institutional change under the common commitment of TPP, inflows of foreign direct investment into fields Vietnam have strengths to take advantage of deals. However, the challenges the TPP will bring are not small, including direct competition with enterprises of large countries, requirements for legislation reform, particularly in labour law, conditions on institutions of market economy and property issues. Therefore, it is essential to have clear development orientation and better preparation for the integration of Vietnamese businesses before the official participation in the TPP.
At the threshold of the new year 2014 with many opportunities and challenges for businesses, what advice can you yourself and the SCIC give to entrepreneurs and the business community of the country?
2014 with many opportunities as well as challenges will be a pivotal year for new developments, particularly in the context of the Government and the Prime Minister having direction and attention to activities of SCIC expressed by newly issued Decree 151/2013/ND-CP dated 1st November 2013 on mandates and mechanisms of the operation of SCIC and Decision 2344/QD-TTg dated 2nd December 2013 approving the restructuring scheme of SCIC towards 2015.
The SCIC will focus on implementing the assigned functions and task, continue to gradually improve the efficiency of state capital investment, implement the restructuring, reorganisation and equitisation of enterprises in management portfolio under the direction of the Government and the Prime Minister, focus on divestment at enterprises in which the State does not need to hold capital, and invest in key sectors and areas of the economy.
At the same time, the SCIC will coordinate with relevant ministries and agencies to report to the Government and the Prime Minister for continued direction to perfect the institution of the SCIC, including issuing a decree on the organisation’s charter and operation of the SCIC, making development strategy of the SCIC towards 2015 with vision to 2020, making and issuing Decree 151 and implementing restructuring scheme.
On the occasion of New Year 2014, on behalf of officials and staff of the SCIC, I wish all businesses and entrepreneurs health. Hope that we all strive for consensus and achieve more success in production and business to contribute to the growth of our nation.
SCIC Promotes Divestment Activities at SOEs Related image(s)
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