Laws initiate SOEs’ jump into non-core business fields

The government’s Decree No. 71 on the investments in non-core business fields released on July 11 which is to take effects on September 1, stipulates that SOEs can use the assets put under their management to make investments in other enterprises.

The decree stipulates that SOEs must not pour capital into the real estate sector, except the enterprises whose main business field is real estate. They must not contribute capital to, or buy stakes of banks, insurance companies, securities companies, venture funds and stock investment firms.

Though the decree sets up strict regulations, the door for SOEs to make investments in non-core business fields still has been opened. SOEs still can make investments in the real estate, banking or stock sectors if they get the approval from the Prime Minister.

As such, one can understand that SOEs can invest in any business fields except the above said prohibited fields.

Ministry also supports investments in non-core business fields

The Ministry of Industry and Trade recently has made public the draft regulations on the organization structure and operation of state owned economic groups, such as the Vietnam Textile and Garment Group (Vinatex), PetroVietnam, and the coal miner Vinacomin.

A common noteworthy thing found in the draft regulations is that the state owned groups have the right to make investments in many different business fields.

Vinatex, a garment and textile group, for example, can do business with import and export, can make and process food, forestry, aquatic and farm produce. It also can make consumer goods, electronics, and stationeries. Especially, it can also get involved in the petroleum product trade, provide bonded warehouse, and finance report auditing services.

If Vinatex makes investments in all the permitted business fields, it’s clear that it pours money into too many business fields which have no relations to the main business field.

The same thing can be found in the draft regulations of the Vietnam Coal and Mineral Industries Group (Vinacomin). The draft regulations have listed a series of business fields the group can join, from lubricants production and trade, emulsion oil and the products for labor safety.

Especially, the group can make and trade pure water, mineral water, or provide the services of printing, publications, training, healthcare, hotel, tourism, maritime, finance and labor export.

The Ministry of Industry and Trade tries to create most favorable conditions for the SOEs to expand their business fields by stating that the enterprises can register additional business fields later.

One year ago, state owned economic groups and general corporations were asked to withdraw their investment capital from other enterprises to gather strength on core business fields.

A report showed that 42 enterprises have investments in the risky sectors of securities, insurance, real estate, investment funds, banking with the estimated value of VND22,405 billion by September 30, 2012.

The enterprises have been told to withdraw all the capital from the risky business fields. In case they don’t succeed in selling stakes, the State Capital Investment Corporation (SCIC) would buy the stakes as the last resort.