PROPOSED NOT INCLUDING LAND PRICE IN ENTERPRISE VALUE WHEN EQUITIZATION

With the proposal not to include the land price in the enterprise value when equitization, the land will be returned to the state to use the land lease mechanism or land use right auction after the equitization is completed.

As reported, on May 17, the Department of Corporate Finance (Ministry of Finance) cooperated with Finance Magazine to organize a Workshop on "Solutions to promote the equitization process of enterprises, public non-business units and enterprises". establishment and divestment of state capital in enterprises”.

At the seminar, Minister Ho Duc Phuc pointed out some problems in the current equitization and divestment process.

The first is slow progress, not yet achieving the results set out in the project that the Government has issued; as well as unsatisfactory equitization revenue.

The Finance Minister said that the plan for revenue from equitization and divestment of SOEs that the National Assembly assigned in 2021 is more than 40,000 billion VND, but by the end of 2021, it will only reach less than 2,000 billion VND.

This "shows a very slow pace of equitization", Phuc said.

Minister Phuc also said that over the past time, the determination of the value of the enterprise has not been accurate, but the biggest risk is the problem of determining the value of land use rights.

“The current value of land use rights has many views, but according to the previous document, the annual land rent is not included in the enterprise value, but the one-time land rental is calculated. However, the disadvantage is that the one-time land lease when determined is not close to the value at the time of determination.

Secondly, after moving into the equitization value today, even though it is close to the value, after 5 years, 10 years... there is still a gap. This is also a loss-making hole, not to mention the one-time payment of land rent, the equitized enterprise can transfer the land use right to build an urban house, or other construction…”, the Minister said. 

In addition, Mr. Phuc also mentioned a number of shortcomings in the housing arrangement that have not been clearly defined, such as: determining commercial advantages, the issue of joint ventures. In addition, the role of the head of a home enterprise. Recently, the countrys determination has not been high, so the progress has not met the requirements.

The Minister also said that in the near future, the Government will select 5 cities directly under the central government to approve the land arrangement plan in the area. At the same time, a few pilot enterprises will be selected for listing and trading on regional and global stock markets, ensuring transparency and competition.

To speed up the equitization process, Mr. Phuc acknowledged the need to revise the policy. At the same time, the Minister raised the issue of determining the value of land use rights, in which the value of land use rights is included in the enterprise value when equitization?

Notably, the proposal not to include land price in the enterprise value upon equitization has received the consent of a number of units representing the owners; representatives of leaders of state-owned corporations and corporations when presented at the above seminar.

Instead, when equitized, the land will be returned to the state to use the land lease mechanism or land use right auction after the equitization is completed.

Specifically, agreeing with the proposal to remove land from the enterprise value when equitization, Mr. Nguyen Xuan Nam, Deputy General Director of Vietnam Electricity, said that bringing in land causes difficulties for businesses, because the price The market is like this and changes constantly. Businesses are very worried about making mistakes due to unclear policies, not because they want to do it wrong.

And according to the opinion of Dr. Vu Dinh Anh, an economic expert, has long seemed that we are not selling businesses but selling land. Many related offenses are also related to land. Therefore, to reduce violations, many people have to go to prison, it is advisable to separate land from the equitization of state-owned enterprises.

A typical example of equitization stagnation due to land-related problems is the case of Bank for Agriculture and Rural Development (Agribank).

Agribank is on the list of businesses that must complete equitization in the 2017-2020 period according to the Prime Ministers Decision No. 26/2019, but so far has not been able to do so due to land problems.

In particular, Agribanks equitization roadmap depends on the approval process of Agribanks plan to arrange housing and land facilities in provinces and cities.

With 80 housing facilities currently not approved by the Ministry of Finance, over the past time, the State Bank of Vietnam (SBV) has directed and guided Agribank to review to build and propose a plan to arrange according to regulations to accelerate the equitization process.

The Department of Corporate Finance (Ministry of Finance) has also requested the State Bank to focus on completing the equitization of Agribank in 2022 and early 2023. Accordingly, the state holding rate after equitization is 51%, while the remaining number is 51%. Expected revenue from equitization at par value is VND 19,847 billion.