It’s difficult to dissolve and bankrupt SOEs

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VietStock FI English - 39 month(s) ago 1 readings

In the last 10 years of renovating and restructuring state owned enterprises, 2001-2010, only 91 SOEs were bankrupted, and 227 dissolved.

In the last 10 years, the State has been step by step withdrawing its capital from enterprises. It is now holding stakes in 19 business fields instead of 60 as previously. The representatives of the state owner in SOEs have been handed over from local authorities to the State Capital Investment Corporation (SCIC).

Reviewing the SOE restructuring in the last 10 years, a report by the Ministry of Planning and Investment said that the result of the restructuring process is faint, mainly because of unreasonable policies and mechanisms.

The ministry has pointed out that one of the most important achievement of the restructuring process is that all the SOEs have shifted to operate in accordance with the 2005 Enterprise Law.

In 2001-2010 period, 1189 SOEs changed their operation modes after the activities of assignment, sale, contracting, leasing or dissolution, merger and acquisition.

Of these modes, merger and acquisition proves to be the most popular with 599 cases successfully implemented. The dissolution was applied to 227 cases.

Meanwhile, the number of enterprises that went bankrupted were the lowest, with only 91 cases done.

The dissolution or bankruptcy only occurred in small or very small localities. Statistics showed that 68 SOEs put under the management of local authorities went bankrupted, or 74 percent of bankrupted enterprises nationwide. Meanwhile, 191 local SOEs were dissolved, or 84 percent of dissolved enterprises nationwide.

The number of SOEs put under the management of ministries and branches was much lower: only 21 SOEs were bankrupted, 27 dissolved. As for general corporations and economic groups, only nine were dissolved and 2 bankrupted in the last 10 years.

The modest number of dissolved and bankrupted enterprises would surprise people, if noting that a lot of SOEs operated not very well. Official figures show that up to 12 percent of SOEs took loss and the average loss incurred by SOEs was much higher than that of non-SOEs.

The researchers of the Ministry of Planning and Investment have pointed out that the main reason behind the low number of bankrupted enterprises is the overly complicated procedures, which made dead SOEs unburied.

Under the current regulation, if enterprises still have assets such as workshops, head offices and storehouses which have not been liquidated, and have accounts receivable which have not been collected, still cannot fulfill the procedures for bankruptcy. If so, enterprises still cannot pay laborers and cannot declare bankruptcy.

Especially, how to deal with bankrupt enterprises is always the biggest headache. The current law does not clearly stipulates the time of stopping debt payment of enterprises, which makes the asset liquidation team puzzled.

To date, the State has not promulgated a mechanism which allows to clear irrecoverable debts. It is also unclear about how to deal with the sums of money enterprises owe to social insurance agencies, in case the enterprises do not have sources of income to pay.

In related news, MPI said that one of the big achievements in the SOE restructuring process is that the changes in the ownership mode helped recover a lot of SOEs which were on the verge of bankruptcy.

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