State-owned enterprise restructuring: Government’s direction in the period of 2021 – 2025

Trường Lăng

July 26, 2022


State-owned enterprise restructuring: Government’s direction in the period of 2021 – 2025

Trường Lăng

July 26, 2022

Equitization of state-owned enterprises (SOEs) and disengagement of the state capital from enterprises are essential policies that aim to concentrate State resources on strategic areas while simultaneously motivating SOE development. The system of mechanisms, regulations, and laws supporting this process has been developed and completed to remove barriers, accelerate the implementation process, and attract investors. However, several businesses’ SOE restructuring between 2016 and 2020 did not produce the desired outcomes.

The equitization process is stalling, impeding Vietnam’s economic growth.

According to statistics compiled by the Corporate Finance Department (Ministry of Finance), from 2016 to 2020, the equitization plan of 180 firms was approved by competent authorities, with a total market cap of 19 billion USD and the value of state capital is 8.8 billion USD.

However, only 39 of the 178 equitized enterprises are on the list of equitized firms according to Official Letter No. 991/TTg-DMDN and Decision No. 26/2019/QD-TTg of the Prime Minister (reaching 28% of the plan). Even in 2021, according to the Ministry of Finance’s report, only four state-owned enterprises have been equitized.

The overall estimated value of shares sold to entities (strategic investors, authorities and workers, trade unions, public auction) is 4.2 billion USD (equivalent to 48 percent of the state capital value in the enterprises). The total actual selling value, however, was just 975.6 million USD (23 percent of the planned sale plan, equivalent to 11 percent of the state capital value in the enterprise).

Photo by VietNam News

In terms of divestiture, the total amount divested between 2016 and 2020 is 1.2 billion USD, earning 7.6 billion USD. In which, the state capital was divested in 106 units under Decision No. 1232/QD-TTg and Decision No. 908/QD-TTg, for a total value of 278.5 million USD, earning 582.6 million USD (reaching 30 percent in quantity and 11 percent in value compared to the plan approved by the Prime Minister).

The slow equitization of SOEs hinders the development of Vietnam’s economy because many enterprises operate commensurate with their resources and have no motivation for development. Many businesses are not only capital-intensive but also land-intensive and labor-intensive, but the added value and revenue have not met expectations.

Barriers and difficulties in the restructuring process

According to a recent report on SOE restructuring outcomes, by the end of 2020, Vietnam still has over 500 enterprises with 100 percent charter capital owned by the State and roughly 200 enterprises in which the State owns controlling shares (out of 350 enterprises with capital contributed by the State).

The process of equitization and divestment in some localities is still slow; equitization still faces many difficulties. Hanoi and Ho Chi Minh City accounted for 54% of the enterprises on the list; however, there haven’t been many changes recently. Hanoi, in particular, had to equitize 13 firms, accounting for 14% of the plan, and Ho Chi Minh had to equitize 38 businesses, accounting for 40% of the plan.

In addition, the mechanisms and laws for conducting SOE investment operations continue to be challenging. Due to numerous regulations, the process of executing company investment activities takes a long time, resulting in low investment efficiency, and businesses lose chances when the market is favorable.

Some of the reasons for the limitations include: 

  • Some agencies, localities, and SOEs have not seriously taken the Prime Minister’s proposal. 
  • Some individuals and corporations violate market principles by failing to disclose transparent financial information in their production and commercial activities. 
  • The delay in equitization is partly because land revaluation of big SOEs, such as Agribank, needs a long time to process.
  • After converting to joint-stock corporations, some firms find it difficult to reform corporate governance due to the high percentage of State holding capital, affecting production and commercial operations results.

Approving the scheme on restructuring SOEs for the period of 2021-2025

On March 17, 2022, Deputy Prime Minister Le Minh Khai signed Decision No. 360, approving the scheme “Restructuring state-owned companies, focused on economic groupings and corporations in the period 2021-2025.” 

The scheme establishes clear milestones for 2025, essentially completing the reorganization and restructuring of SOEs’ ownership. At the same time, according to Resolution 23 of the National Assembly on the national financial plan, revenue from restructuring enterprises must be paid to the state budget in the amount of at least 10.6 billion USD. In addition, the scheme also sets a number of objectives to improve the performance of SOEs.

According to the Ministry of Planning and Investment’s estimate, 22 enterprises are scheduled to be equitized between 2021 and 2025. There are several significant firms in Vietnam, such as the Bank for Agriculture and Rural Development of Vietnam and the Mobifone Telecommunications Corporation.

Completely solve the situation of investment outside the primary industry 

To continue the restructuring process, developing an appropriate roadmap to equitize SOEs and divest state capital is necessary, as well as standardizing criteria related to the valuation of SOEs. Additionally, several enterprises after equitization with reasonable conditions and sizes should be piloted to register for trading and list on regional and world stock markets. 

State management agencies need to completely solve the scattered investment outside the central business lines through divestment, ensuring that SOEs focus on their operational business activity instead of spreading funding on investing or financing activities. 

The State also creates a mechanism for enterprises to be proactive and autonomous in handling projects, using resources per the law to support the dissolution and bankruptcy of SOEs.

Improve institutions and eliminate obstacles to SOEs restructuring 

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Photo by the Chamber of Commerce and Industry of Vietnam – VCCI

To improve institutions and policies, the Decision clearly states that the government and related agencies must review and amend as soon as possible the Law on Management and Use of State Capital Invested in Production and Business in Enterprises, the Law on Bidding, the Law on Land, and other relevant legal documents.

Competent authorities must also accelerate the completion of regulations governing the selection of enterprises to participate in the execution of sociopolitical tasks. Furthermore, mechanisms and policies are being developed to encourage coordination and collaboration between SOEs or between SOEs and enterprises from other economic sectors.

Adjust the mechanism of corporate governance

It is necessary to strengthen the quality of corporate governance, and adjust the corporate governance method to approach the “good governance model” according to international practices namely:

  • Forming a professional and highly qualified SOE management team; improve technology level, innovation capacity, and modern management process according to international standards.
  • Promote the leading role of SOEs in the formation and expansion of production and supply chains, especially in key industries and fields of the State.
  • Optimizing capital, land, and brand resources at the enterprise; strictly managing capital, state assets, and enterprise assets following the law.
  • Promote decentralization and individualization of responsibilities, empower enterprises to be more proactive, uphold the responsibility of leaders in restructuring and implementing production and business activities; strengthen supervision and inspection of SOEs’ activities, promptly detect and strictly handle violations.


The equitization of SOEs is an unavoidable development in order to improve corporate performance and business efficiency. However, in the 2016 – 2021 period, equitization has been stagnant, failing to meet the goal set forth for both objective and subjective reasons. To achieve a significant transformation and accelerate the equitization of state-owned enterprises, the government must apply several solutions to address bottlenecks and obstacles that impede the implementation process.

If you are looking to invest in Vietnam’s SOEs, contact Viettonkin for the most up-to-date and reliable information. Viettonkin and our team of specialists have over 12 years of expertise in the sectors of investment and business consulting. Contact us now.

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