SOEs urged to withdraw from real estate projects
10-06-2015 14:10:58+07:00
SOEs urged to withdraw from real estate projects
State-owned enterprises (SOEs) should disinvest from real estate projects if their products are located in central areas and have high value, the HCM City People’s Committee has said.
However, as analysts said, it is easier to pour money into housing projects than withdraw money from them.
Several years ago, SOEs rushed to inject money into real estate projects at a time when the market was hot.
Giditex is an example. The textile and garment company owns a 5-star hotel on Ben Chuong Duong Street in HCM City which has a total area of 5,800 square meters in District 1 in the central area.
It also owns a fashion performance center and apartments for lease, covering an area of 70,000 square meters on No 7 Truong Chinh Street.
Giditex has been told to withdraw capital from the projects or transfer the projects to other investors.
Fifteen companies belonging to HCM City authorities have been told to withdraw VND3.817 trillion from non-core business fields in 2014-2015. Fifteen percent of the capital has been disinvested so far, which means that it would have to fulfill a large volume of works this year.
An analyst noted that there are two options for SOEs. SOEs could transfer real estate projects to the state-owned real estate firms in the city. This solution would help preserve capital, because the projects would be transferred from one SOE to another SOE.
Second, SOEs could hand over the projects to the city’s land fund development center, in charge of developing clean land and programming land use.
Analysts noted that SOEs would prefer the first solution.
The analysts said that it would be a feasible plan to transfer projects to real estate firms as they have experience in the field.
Regarding project valuation, the analysts said with the current pricing mechanism, the SOEs will not take a loss.
City officials said the capital withdrawal process had been going slowly not because SOEs fear they would take losses, but because they do not want to disinvest.
The HCM City People’s Committee has released an “ultimatum” that SOEs will be punished if they deliberately delay capital withdrawal.
In related news, the Electricity of Vietnam (EVN) successfully divested almost VND1 trillion VND from non-core businesses in 2014, according to the group’s Deputy General Director Dinh Quang Tri.
A Government decree barred EVN from investing in non-core businesses, such as banking, finance, securities, insurance, investment funds and real estate.
