State minority ownership in equitised enterprises hinders growth

State minority ownership in equitised enterprises hinders growth

In equitised firms with under 36 per cent State ownership, Government-appointed representatives remain deeply involved in strategic decisions, particularly capital increases, infrastructure investments and structural overhauls, even though they lack controlling stakes.

Visitors enjoy activities at Đầm Sen Cultural Park in HCM City. The park has struggled for years to execute renovation and development plans due to State minority shareholding. — VNA/VNS Photo

Despite their minority shareholding position, State representatives in many equitised enterprises are unintentionally stalling business development, obstructing their ability to raise capital, secure loans and invest in long-term growth.

In equitised firms with under 36 per cent State ownership, Government-appointed representatives remain deeply involved in strategic decisions, particularly capital increases, infrastructure investments and structural overhauls, even though they lack controlling stakes. 

This heavy-handed oversight can lead to significant delays or outright blockage of key initiatives, undermining the agility necessary for post-pandemic recovery and expansion.

A concrete example is Đầm Sen Cultural Park, under the operation of Phu Tho Tourist Service JSC.

Boasting prime real estate, a recognised brand and unused land reserves, the park has struggled for years to execute renovation and development plans.

Its State minority shareholding is cited by independent observers as a factor restricting timely executive decision-making. This has led to untapped potential, while the entertainment and tourism market continues to evolve with more modern and competitive models.

The issue goes beyond stalled investment. Many equitised enterprises also face financing obstacles.

Even though lenders do not outright refuse loans, the internal complexities driven by State involvement can slow approval processes. Consequently, businesses may miss critical opportunities or incur higher financing costs.

According to Chairman of the Vietnam Young Entrepreneurs Association Đặng Hồng Anh, this pattern reflects a systemic problem. 

In an environment where market-driven agility is key, State participation in every critical decision, even without veto power, can bog down operations, thwarting timely capital deployment and strategic execution.

To overcome this bottleneck, the Vietnam Young Entrepreneurs Association recommends accelerating State divestment, especially in enterprises where Government equity is not pivotal to strategic interests. 

Once State capital is fully withdrawn, management could gain the freedom to make market-based decisions, facilitating faster recoveries and enabling longer-term planning.

Another key recommendation urges reforms in how State divestment price is set. By mandating at least three independent valuations and using average results as the sale price, policymakers can ensure transparency, avoid undervaluation and increase investor confidence, thus streamlining future privatisations.

Moreover, divestment proceeds should be judiciously reinvested into national priorities. Funds tied up in now-passive enterprises would be better directed toward infrastructure and innovation projects, aligning capital allocation with Việt Nam’s strategic growth agenda.

The association also calls for regulatory improvements clarifying roles and limitations of minority State shareholders, aligning their rights with corporate law and governance structures.

A transparent framework would reduce arbitrary interference in management, allowing enterprise leadership to execute independently and swiftly.

Enhanced corporate governance

"We fully understand and share the responsibility of safeguarding State capital, but we also seek a management framework that is flexible and responsive to market economic realities," Hồng Anh told Lao Động (Labour) Newspaper. 

"By removing existing obstacles, businesses can access capital, boost investments, create jobs and make greater contributions to the economy — goals that both the public and private sectors strive for."

Removing barriers related to non-controlling State capital is not only crucial for individual companies, but also essential for fostering a transparent and equitable business environment that encourages innovation. 

This aligns with the spirit of Resolution 68-NQ/TW, which aims to position the private sector as a key driver of economic growth.

The association reaffirms its commitment to supporting the business community by acting as a bridge to relevant authorities, voicing concerns, proposing recommendations and promoting substantial reforms for a favourable investment climate and a sustainable future for the nation. 

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