Shortcomings and violations in equitisation

In 2009, the Government Inspectorate and inspectors from six ministries and 53 provinces and cities throughout the country uncovered the misuse of VND3,747 billion and nearly 140 ha of land involved in 172 businesses. They proposed taking back VND1,725 billion and asked the relevant agencies to investigate three cases and deal with 48 individuals and 10 collectives found to break the law.

The inspections aim not only to handle illegalities but also to draw valuable lessons and experiences so as to make the equitisation of SoEs more effective. According to the inspectors, violations committed by businesses mostly involve the wrong appraisement of assets (including land, workshops, materials and commodities…). In addition, share auctions, management of money taken from equitisation and financial investment after equitisation have not been used properly, causing waste and a loss of State assets and affecting the workers.

Deputy Chief Government Inspector Mai Quoc Binh says that the inspections were conducted thoroughly, helping businesses to rectify weaknesses and mistakes and revamp the State’s legal policies.

Regarding the appraisal of business assets, Mr Binh says that many appraisal councils have intentionally ignored the guidance documents from the Ministry of Finance and lowered the quality of assets to 20 percent, including property and means of transport.

The Government Inspectorate together with several provincial and municipal inspectors have dealt with many individuals and organizations for conducting criminal acts when buying and selling shares and enforcing preferential regulations on workers’ allowances and re-training costs.

Dong Quang Hung, the chief inspector of the northern province of Yen Bai, says that in 2009 the provincial inspectorate conducted 277 inspections, dealt with misappropriated property worth nearly VND34 billion and took VND28 billion back to the State budget.

While inspecting the Thac Ba Hydroelectricity Joint Stock Company, the provincial inspectorate discovered that the company had fraudulently assessed the value of its land much lower than the real market value and had evaded income tax payments of VND314 million. At the Construction Materials JSC, it uncovered that five years ago, the company still owed the State Budget VND470 million and illegally sold VND218 million worth of shares to its leaders.

Strengthening inspection

Wrong doings in equitisation were found in payments and the collection of equitisation management money, the management and use of the equitisation fund, the management of land, the value of land, ignoring business accounting regulations and performing State duties.

In Hanoi Government inspectors found that the Construction and Investment JSC N01 had missed out a 166.6sq.m-office, another 280sq.m office owned by member companies, a 1,000sq.m store and an accounts payment of more than VND199 billion while drawing up.

The Viet Ha Construction and Investment JSC were allocated 3,234sq.m of land at 235 Lac Long Quan Road in Hanoi to build houses for sale but in 2005 after being equitised the company did not include the piece of land in the business value.

Most businesses which were turned into joint stock companies did not sign land hire contracts with Hanoi’s Department of Natural Resources and Environment.

Vu Hong Khanh, vice chairman of the Hanoi People’s Committee says that State inspection has helped to promote the capital’s socio-economic development.

Hanoi uncovered violations and the misuse of VND32.5 billion and 21.13ha of land from 529 inspections conducted in 2009. It proposed dealing with the 58 officials responsible.

The country has so far equitised nearly 4,000 businesses and will continue to equitise 1,500 others. Under the Prime Minister’s direction, by July 1, 2010, all State-owned enterprises will operate according to the Enterprise Law in the form of a JSC or a limited company. This requires State inspectors and officials to step up inspections to prevent capital waste.