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VIETNAM - State firms want more freedom to invest DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

VIETNAM - State firms want more freedom to invest

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VIETNAM - State firms want more freedom to invest Empty VIETNAM - State firms want more freedom to invest

Post by lexie Mon Nov 14, 2011 7:21 pm

Last update 14/11/2011 09:20:00 AM (GMT+7)
State firms want more freedom to invest
State-owned enterprises are calling for changes in a draft decree that would limit the size of their investments in banks, insurance companies and securities companies. Some State-owned enterprises are arguing that any such limits should be high enough to allow them to hold controlling interests in these companies.

VIETNAM - State firms want more freedom to invest 20111112124345_1

Under the draft regulation drawn up by the Ministry of Finance, State-owned enterprises (SOEs) would be required to reduce the percentage of capital they invest in non-core lines of business and would be limited to investing no more than 10 per cent of their charter capital in companies operating in the fields of banking, insurance or securities investment.

They would also be limited to investing in only a single company in any one of these financial sectors.

In addition, the contribution to such companies by each SOE would not be allowed to exceed 10 per cent of the financial company's charter capital. In other words, the SOE could not hold a stake greater than 10 per cent in any such company.

As a further limitation, the total contribution each SOE and its affiliated companies and subsidiaries would not be able to exceed 15 per cent of the financial company's charter capital without approval from the Government. Under existing regulations, this percentage could reach 20 per cent for companies in the banking, securities and insurance sectors and 30 per cent for all other sectors.

The draft decree would also include regulations on supervising the financial status of SOEs in order to promote more effective use of State capital.

An official from the Ministry of Finance's enterprise finance department said that SOEs had already been ordered this year to withdraw their investments from non-core lines of business – particularly in the financial sector, which exposed SOEs to high levels of risk. However, the unwillingness of SOEs to take the requirement seriously has necessitated the drafting of the new decree, the official said.

The decree would further help SOEs focus on their core lines of business, sharpen their competitiveness in those fields, and improve corporate governance, he added.

Tran Long An, a representative of the State-owned petroleum distributor (Petrolimex), told the website VnEconomy that the percentage of investment in financial affiliates should be capped at 15 per cent rather than 10 per cent, a level which would more often put SOEs in a plurality position among shareholders and therefore better able to influence management of these affiliates.

He noted that, for a number of SOEs, investment in financial affiliates served the core line of business. For instance, Petrolimex had invested in a joint venture bank between Viet Nam and India that would help it finance petrol imports.

A representative of Viet Nam Posts and Telecommunications (VNPT) Group said that SOEs should be allowed to make investment in these sensitive fields large enough to control the target company's operations.

He noted that VNPT had invested in Maritime Bank and a representative of VNPT was acting as chairman of its board of directors due to the large amount of capital VNPT had contributed to the bank.

However, under recent pressure to withdraw investments from non-core lines of business, VNPT had been forced to reduce its investment in the bank from 20 to 15 per cent and had been unable to invest further in the bank at a time when it would have been highly profitable, he said.

Trinh Cong Loan, a representative from Viet Nam Cement Industry Corporation, suggested that any reduction in the level of investment that SOEs can make in non-core businesses should be imposed gradually, following a roadmap. If all State-owned investment were withdrawn at the same time, it could add to instability in the financial sector, Loan suggested.


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