SOE restructuring to reduce burden on state budget

SOE restructuring to reduce burden on state budget

The restructuring of two big state-owned enterprises (SOEs) in the construction industry will help reduce the financial burden on the state budget and the government’s effort towards state management, said a state agency.

This is one of the goals of the restructuring of Vietnam Industry Construction Group (VNIC) and the Housing and Urban Development Group (HUD), which were set up on January 12, 2012, said the Ministry of Construction.

Earlier this month Prime Minister Nguyen Tan Dung decided to stop the pilot project carried out at the two construction groups, according to Decision No 1428/QD-TTg. He also assigned the ministry to rearrange the enterprises directly under its management.

The ministry is tasked with establishing the new Song Da Corp by reorganizing Song Da Holdings and its affiliates based on the current VNIC configuration, and establish a new Housing and Urban Development Corp by reorganizing HUD and its affiliates.

The restructuring of the two groups will follow this sequence: the end of the pilot project, the reorganization of the two groups’ affiliates to the way they were before they joined the project, and the transfer of rights and obligations of the owner of state capital in the two groups to the ministry.

Regarding the reorganization of the subsidiaries under the two groups, the ministry said it would direct the process and submit the restructuring plan to the Prime Minister so that the process will be completed by 2015.

The ministry has also been asked to develop equitization plans for the two new corporations and submit them to the prime minister for consideration.

The two-year pilot project has revealed a number of issues, including the small and limited capacity of the groups.

With VND6.64 trillion and VND5.5 trillion equities, VNIC and HUD earned VND45.5 trillion and VND26.66 trillion revenues in 2011, respectively.

However, the two groups had channeled their money into non-core businesses despite limited financial capacity. As a result, they are at high risk when the business climate changes tides, as it is currently happening.

Inefficiency was the primary reason for the government to terminate the two projects, Pham Viet Muon, Vice Chair of the Government Office - cum - deputy head of the National Steering Committee for Enterprise Renovation and Development, told Dau Tu newspaper.

Since 2005, Vietnam has piloted seven SOE groups which were all founded on the basis of big State-funded corporations. In 2009, the prime minister decided to establish four more groups, including VNIC and HUD, said the Vice Chair of the Office of government.

Streamlining state-owned economic groups is now the government’s goal, said Vu Duc Dam, Minister-Chair of the Government Office, at the monthly press briefing on September 5.

He added that the government plans to reduce the number of State economic groups from 11 to 5-7

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