State-owned enterprise’s restructuring in the 2011-2015 to improve performance

Rearranging, innovating State-owned enterprises (SOEs) is one important content of the economic reform. In the 2011-2015 period, Binh Duong province actively implemented solutions to rearrange, innovate SOEs and gained good results.

Restructuring to be on track

To implement the Prime Minister’s direction on the project “Restructuring SOEs, focusing on State-owned corporations, groups in the 2011-2015”, Binh Duong province set up plans to rearrange, restructure SOEs, especially divest capital and make public SOEs.

Thanh Le General Import - Trading Corporation is conducting restructure and will make initial public offering in Feb 2016.

Tran Thanh Liem, Deputy Chairman of PPC, said as planned, the province had 2 corporations, including Becamex IDC and Thanh Le General Import - Trading Corporation (Thalexim), to execute restructuring. Up to now, Becamex IDC conducted divestment at 9/26 subsidiaries. Among these, 7 subsidiaries completed divestment and 2 companies are carrying out business valuation and will complete divestment by the end of 2015. Thalexim basically fulfilled all procedures, still has some difficulties in valuing assets relating to lands. The province asked agencies and sectors to handle these problems. Expectedly, in the first quarter of 2016, Thalexim will complete restructuring, transform into a joint stock company, and make its initial public offering.

In addition, the province implemented equitization at 4 subsidiaries of two 100%-SOEs, including Binh Duong Rubber Company, Binh Duong Materials and Construction Company, Binh Duong Forestry Company, and Binh Duong Water Supply Sewerage and Environmental Company. Binh Duong Rubber Company was completed equitized and put into operation from Jun 1^st 2015. The province also privatized Binh Duong Garment Company under Binh Duong Production – Import Export Corporation. The company will officially go into operation in December 2015.

To sustain business efficiency

SOE restructuring requires not merely the rearrangement, reorganization but also a deep innovation at the core to promote potentialities, overcome shortcomings of SOEs, thereby, improving business efficiency, strengthening the leading role of SOEs, heightening the economic efficiency of state capital in SOEs.

A representative of Becamex IDC said, in the 2011- 2015 period, despite negative impacts of the global recession and the implementation of SOE restructuring, Becamex IDC operated efficiently. Average rate of return on assets in the 2011-2013 reached 20%, in the 2014- 2015 reached 7%; particularly, in 2012, the corporation gained surging revenue, profit due to implementing cooperative projects with Tokyu Corporation (Japan).

Another issue after restructuring is that SOEs must inherit a redundant labor force from the old organization. This is a huge obstruction to business growth after restructuring. However, due to the flexible implementation of rearrangement, restructuring, equitization and divestment from 2011 at SOEs in the province, there have been no cases of redundant labor, employees are still able to purchase preferred shares.

Mr. Liem assessed, actual results of provincial economic development proved that Becamex IDC and Thalexim played an important role in the infrastructure construction, creating a favorable investment environment to attract foreign investments. Besides, the two corporations executed projects in education, health, culture ... in order to improve living standards for people in the province.

“With such an important role, the province asked the Government’s permission for provincial People’s Committee to continue representing the ownership of state capital in the 2 corporations after equitization, so that the province would own a tool and resources in directing local socio-economic development; simultaneously, the province would be able to implement effectively socio-economic developing programs until 2020”, added Mr. Liem.

Reported by Hoang Pham – Translated by Ngoc Huynh