Viet Nam: SOE Reform and Corporate Governance Facilitation Program - Project 1

Sovereign Project | 39538-023

Summary

The SRCGFP will support the agenda of the Government of Viet Nam for state-owned enterprise (SOE) reform by equitizing and transforming general corporations. Participating general corporations will be restructured under a comprehensive package of corporate and financial restructuring and enhanced operational efficiency and corporate governance. Debt restructuring will strengthen general corporation balance sheets through improved cash flows and debt-servicing capacity, generating additional resources for productive activities. None of the restructured debt will be nonperforming loans. Corporate restructuring will enable participating general corporations to exploit economies of both scale and scope by merging several small joint stock subsidiaries in each general corporation into larger entities organized along lines of business, combined with the divestiture of disparate non-core business units.

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Project Name SOE Reform and Corporate Governance Facilitation Program - Project 1
Project Number 39538-023
Country Viet Nam
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2613-VIE: SOE Reform and Corporate Governance Facilitation Program - Project 1
Ordinary capital resources US$ 113.83 million
Loan 2614-VIE: SOE Reform and Corporate Governance Facilitation Program - Project 1
Asian Development Fund US$ 10.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector Public sector management - Economic affairs management
Gender Equity and Mainstreaming No gender elements
Description The SRCGFP will support the agenda of the Government of Viet Nam for state-owned enterprise (SOE) reform by equitizing and transforming general corporations. Participating general corporations will be restructured under a comprehensive package of corporate and financial restructuring and enhanced operational efficiency and corporate governance. Debt restructuring will strengthen general corporation balance sheets through improved cash flows and debt-servicing capacity, generating additional resources for productive activities. None of the restructured debt will be nonperforming loans. Corporate restructuring will enable participating general corporations to exploit economies of both scale and scope by merging several small joint stock subsidiaries in each general corporation into larger entities organized along lines of business, combined with the divestiture of disparate non-core business units. Additionally, management restructuring will enhance operational efficiency by strengthening corporate management processes and improving governance. OCR will be used to support financial and corporate restructuring, while operational restructuring and improved corporate governance will be supported by the complementary loan component funded from ADF resources.
Project Rationale and Linkage to Country/Regional Strategy Transforming and reforming are critical to reducing the dominance of inefficient state production, promoting private sector development, and enhancing economic growth. The Goverment's Socio-Economic Development Plan 2006-2010 calls for diversifying ownership to improve the efficiency and competitiveness of SOEs and for narrowing or eliminating the role of ministries and other state entities in SOE governance and management.
Impact Improved profitability and transparency of equitized and restructured SOEs, including large general corporations and their subsidiaries
Project Outcome
Description of Outcome

Participating general corporations are transformed into focused, efficient businesses with strong balance

sheets and improved corporate governance.

Progress Toward Outcome Progressing despite some challenges.
Implementation Progress
Description of Project Outputs

1. Debt restructuring implemented, combining financial and corporate restructuring

2. Increased operational efficiency and improved corporate governance of general corporations and other SOEs

3. Institutions supporting key aspects of SOE reform strengthened and governance improved

Status of Implementation Progress (Outputs, Activities, and Issues)

Following the President's approval on the extension of utilization of the MFF facility until 14 December 2019, the extension of implementation of L2614-VIE under PFR1 has also been approved until 31 Dec 2017. This will give time for the SOEs to complete their activities under this component.

There has been good progress in PFR1 implementation. SDC has engaged 3 individual consultants to assist them in the preparation of procurement packages. In addition, SDC has awarded 2 consulting packages to assist them in corporate brand strategy and information system strategy. The engagement of the technical advisors to support SDC's restructuring effort is on going, including the procurement of the IT equipment packages.

Key facts. PFR 1 is targeting two SOEs namely: Song Da Corporation (a large construction conglomerate) and Southern Waterborne Transport Corporation (Sowatco), an inland water transport and logistics company. The ADB debt restructuring loan was utilized by SDC and SOWATCO to replace high cost short-term loans with ADB long-term Loans. The restructuring plan of the two selected SOEs was supported by two international firms (McKinsey and Ernest & Young) with expertise in corporate and operational restructuring. SDC has now in place a firm restructuring plan and aims to complete the main restructuring process by 2017 by focusing on core line of business and divesting from non-core business lines. SOWATCO is progressing in the implementation of its restructuring plan, and is now focused on two core business activities-Logistics and Trading. It is in process of divesting the unrelated business lines

On-going Efforts. Efforts are underway to extend the MFF facility to more qualified SOEs in coordination with the Ministry of Finance (MoF) under second and third phase of the project (PFR 2 and 3). MOF has established a transparent process of selecting additional SOEs through a qualification process and has developed a set of criteria to short list candidate SOEs for participation in the MFF project. The process established a threshold level of acceptability and assesses candidates with the highest potential to meet reform objectives. For PFR 2, three SOEs were selected and underwent due diligence by an international consulting firm (since May 2013) for their consideration under PFR 2. ADB expects to allocate about $330 million under PFR 2, expected to be approved in third quarter 2014. PFR 3 will follow estimated by 2015-2016.

Five review missions were undertaken in 2013 to review the implementation progress of PFR1. The processing of PFR2 is underway and 3 SOEs have been identified for potential support. At the same time, an initial shortlisting of 3 potential SOEs has been undertaken for PFR3.

Geographical Location Viet Nam
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Various consultation missions were undertaken by ADB project team with Government counterpart agencies including IAs.
During Project Implementation PMU staff at MOF as well as counterpart staff from IAs were designated to assist in the smooth implementation of the project.
Business Opportunities
Consulting Services The consulting services will be procured by the IAs in accordance with ADB's Guidelines on the use of Consultants (2010 as updated from time to time). Selection of consulting firms will be inviting full technical proposals and using QCBS selection process.
Procurement Goods shall be procured on the following methods of procurement: (i) ICB, (ii) NCB, (iii) Shopping. The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the procurement plan. The Borrower may only modify the methods of procurement of threshold values with the prior agreement of ADB, and modifications must be set out in updates to the procurement plan.
Responsible ADB Officer Prasanna Kumar Jena
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
Ministry of FinanceEFDMOF@FPT.VN28 Tran Hung Dao
Ha Noi, Viet Nam
Timetable
Concept Clearance 12 Mar 2009
Fact Finding 02 Mar 2009 to 06 Mar 2009
MRM 15 Jul 2009
Approval 14 Jan 2010
Last Review Mission -
PDS Creation Date 23 Oct 2009
Last PDS Update 11 Sep 2014

Loan 2613-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
14 Jan 2010 27 Sep 2010 11 Jan 2011 30 Jun 2013 30 Jun 2015 15 May 2015
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 113.83 Cumulative Contract Awards
ADB 113.83 14 Jan 2010 113.83 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 14 Jan 2010 113.83 0.00 100%

Loan 2614-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
14 Jan 2010 27 Sep 2010 11 Jan 2011 30 Jun 2013 31 Dec 2017 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 10.00 Cumulative Contract Awards
ADB 10.00 14 Jan 2010 3.93 0.00 46%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 14 Jan 2010 3.56 0.00 42%

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