Equitization of state-owned enterprises - Not "selling land" but an effort to enhance the competitiveness of the economy

Land - the "focal point of risk" in the equitization process

Most State-owned enterprises (SOEs) were established and developed in association with large land reserves, many of which are located on “golden land” or “diamond land” sites in urban areas, transport hubs, industrial zones, and service zones. If the equitization process lacks transparency and strict control, the value of land use rights may easily be undervalued or obscured in documentation, and subsequently subject to conversion of use purposes and commercial exploitation, thereby creating a huge land rent differential that falls into the hands of a group of shareholders or investors.

This constitutes a risk of “draining” public assets, turning a sound policy into a channel for profiteering, causing public discontent, and eroding people’s trust in the reform process of State-owned enterprises (SOEs).

The Government’s directive stance is very clear: equitization is intended to enhance the capacity and competitiveness of enterprises and improve the efficiency of State capital and asset utilization; it is absolutely not a matter of “selling land”, “selling enterprises cheaply”, or converting public land into private interests.

Accordingly, all issues related to land in the equitization process - from reviewing land reserves, determining the value of land use rights, preparing post-equitization land-use plans, to conversion of land-use purposes, leasing, and transfer - must strictly comply with the provisions of the Land Law and relevant legislation.

The Decree on restructuring State capital in enterprises only provides principles, procedures, and responsibilities; it must not become a “loophole” for circumventing land legislation or create any parallel mechanism or exception for any party.

Enterprise valuation is the core step in the equitization process, in which land is always the most sensitive factor. To protect public assets, land use rights must first be accurately and fully included in the enterprise’s valuation.

First, there must be a clear distinction between land used directly for production and business activities, and land that is surplus, no longer needed, or has potential for conversion of use purposes. The land-use plan must be thoroughly reviewed and aligned with approved land-use master plans and plans.

Second, the valuation organization must select an appropriate valuation method that closely reflects market prices and ensures the highest possible benefit for the State. The agency responsible for selecting the valuation entity must take responsibility for its decision, while the valuation entity must bear legal responsibility for the valuation results. All acts of collusion or intentional misconduct aimed at “lowering” land values must be strictly handled.

Third, there must be a mechanism for independent appraisal and supervision of the land component within the total value of the enterprise. The opinions of financial authorities, natural resources and environment authorities, and inspection and audit bodies must be substantive and not merely formalities, forming a “technical barrier” to prevent losses.

Closing "loopholes" related to land rent differentials and preventing group interests

A common and dangerous scenario is that an enterprise undergoes equitization based on land valuations calculated only according to the former land-use purpose, but after that, the controlling shareholders push for planning adjustments and convert the land use to commercial, service, or residential purposes, thereby creating a very large land rent differential from which the State gains almost no additional revenue.

To close this “loophole”, it is necessary to clearly determine, right from before the equitization process, the post-equitization land-use plan. In cases where the land has the potential or need for conversion of use purposes, options must be considered for the State to recover the land and conduct an open auction, or to adopt an appropriate mechanism to regulate the land rent differential. Equitization transactions involving large land reserves or land in prime locations must be placed under special supervision by inspection and audit bodies, elected bodies, and the Viet Nam Fatherland Front. It is also essential to resolutely avoid “bundling” the entire land reserve into the enterprise’s valuation and transferring it to new shareholders as a form of “wholesale” of public land.

The more land information is public and transparent, the lower the risk of losses. In the equitization process, it is necessary to widely disclose the list, area, and location of land plots under the enterprise’s management and use; the legal status of each plot of land (allocated land, leased land, term, and land-use purpose); and the land-use plan before and after equitization, including the roadmap for recovery, auction, or transfer (if any).

When this information is published on the portals of the representative agency of State ownership, of the enterprise, of local land management authorities, as well as through the press, citizens and social organizations will have the grounds to monitor and supervise. This constitutes a “soft barrier” that is highly effective in preventing group interests and behind-the-scenes dealings in land use after equitization.