Selling stakes at loss or doing nothing, SOEs? State owned enterprises (SOEs) are sure of loss if they sell stakes to withdraw capital from the enterprises they invested in. However, the State, the real owner of the enterprises, doesn’t expect loss.   SOEs remain indecisive The government has decided that the SOEs’ process of withdrawing capital from non-core business fields must finish by 2015. However, no move has been taken by the enterprises so far towards the finish. They are reluctant to sell shares now, because they know they would have to sell shares at a loss, as the share prices all have been on the decrease in the context of the economic recession. The Vietnam Chemicals Corporation (Vinachem), for example, could not sell any stakes when putting 2.1 million shares, or 6.13 percent of stakes of VIG, a securities company, into auction. The corporation was requested to sell shares at VND10,600 per share at least. Meanwhile, the VIG market price was just between VND2,300 and VND2,600 per share. This explained why investors refused to buy shares at such a high price. Lilama offered to sell its shares at the Song Vang Hydropower Plant, but no investor registered to attend the auction. According to Deputy General Director of the Electricity of Vietnam Dinh Quang Tri, EVN now tries to withdraw capital from Saigon Vina Real Estate JSC, An Binh Bank and a finance company, after it  withdraw capital from the Nha Trang Power Real Estate JSC. Phung Dinh Thuc, President of PetroVietnam, the national oil and gas group, also complained the group is meeting big difficulties when trying to withdraw capital from real estate projects. According to Thuc, the government previously required to preserve the state’s investment capital when withdrawing capital. It has assigned the Ministry of Finance to draw up a capital withdrawal mechanism for PetroVietnam to reach that end. “We are still awaiting the instruction from the Ministry of Finance. We will try to choose the most suitable moments to withdraw capital to ensure the capital preservation at a highest possible level,” Thuc said. Only one way for SOEs to go It is understandable why the State, the real owner of enterprises, requests SOEs to preserve the state’s capital when selling stakes. However, economists have warned that if the State still insists on the “not taking loss” principle, and keeps reluctant in withdrawing capital, it will never be able to settle the problem of SOEs making investments in non-core business fields. Dr. Nguyen Tri Hieu, a finance expert, has also noted that the request of preserving capital is the biggest hindrance to the capital withdrawal process. It is nearly impossible to sell shares at the prices equal or higher than the buy prices at this moment, when the national economy is facing great challenges. Other economists also pointed out that SOEs have to choose only one way to follow, either selling stakes at a loss, or … doing nothing, while both of the tasks cannot be fulfilled at this moment. The economists have also expressed their worry that SOEs would not give up the dream of making investments in many different business fields once the legal framework paves the way for them to do that. The newly released Decree No. 71 on the state’s investment in enterprises stipulates that SOEs must not contribute capital to real estate firms, banks, insurance, securities companies and venture funds. This means that they will still be able to invest in the fields not mentioned above. Source: DNSG