Vietnam Railways to reduce subsidiaries under restructuring plan

 

The Prime Minister has approved the restructuring of Vietnam Railways (VNR) to reduce the number of its subsidiaries.

According to Official Letter 303/TTg-DMDN issued by the Prime Minister on April 7 to approve this restructuring plan, branches of VNR's locomotive enterprise will reduce from five to three units.

Meanwhile, the railway project management boards of Regions 1, 2, and 3 will carry out a merger to become the sole railway project management board with the role of representing VNR as the investor in projects for VNR.

"We will immediately carry out this enterprise restructuring plan," VNR Chairman Vu Anh Minh told Dau tu (Investment) newspaper.

Also according to this official letter, the Prime Minister agreed to let VNR merge the Hanoi Railway Transport Joint Stock Company (Haraco) and the Saigon Railway Transport Joint Stock Company (Saratrans) into one joint stock company.

The Commission for the Management of State Capital at Enterprises (CMSC) has directed VNR to restructure Haraco and Saratrans in accordance with existing regulations and will not lose capital and assets, according to Dispatch 303.

VNR must also finalise the VNR Restructuring Project for 2021-2025 to submit to the Prime Minister for approval.

Minh said VNR will start the reduction of the Locomotive Enterprise's branches and the merger of the railway project management boards from this month. VNR will urgently complete the plan for the merger of Haraco and Saratrans to submit to the CMSC for approval.

"This work is complicated, but VNR will try to complete the merger in the third quarter of 2022," Minh said.

According to VNR, Haraco and Saratrans operate freight and passenger transport services on the same railway line, leading to unfair competition. At the same station, both companies have arranged labour, and rented headquarters and warehouses, causing a decline in business efficiency.

VNR has admitted failure in transferring Haraco with a charter capital of 800 billion VND and Saratrans with a charter capital of 503 billion VND into joint stock companies.

VNR holds 91.62 percent of Haraco's capital and 78.46 percent of Saratrans' capital. After becoming the joint stock company in 2016, the business results of Haraco and Saratrans both plunged in terms of capacity, revenue and profit.

“If VNR does not boldly stop inefficient businesses, carry out apparatus reform, and cut unreasonable costs, the brand name of Vietnam Railways will not be able to exist in the future," Minh said.

Besides the approved issues, at the VNR Restructuring Project for 2021-2025 submitted to the Prime Minister in March 2022, VNR has proposed to maintain the holding ratio at 51 percent of charter capital at 15 bridge and railway maintenance joint stock companies.

VNR will continue to hold over 51 percent of the capital at five railway signal and information joint stock companies and gradually increase this ratio to 75 percent or 100 percent.

It has also suggested continuously holding controlling shares in Di An Railway Joint Stock Company and Gia Lam Railway Joint Stock Company to develop the railway mechanical industry.

For selecting a strategic investor, VNR will develop a roadmap to reduce its capital at these two companies to 51 percent and submit it to the Prime Minister for approval.

The VNR restructuring project was submitted to the Government in 2016. This project was expected to be implemented in 2017-2020, with the goal of restructuring and divesting capital at its subsidiaries nationwide.

Accordingly, the corporation will have a more reasonable production and business model focusing on three core industries of railway transport, railway infrastructure and railway mechanical engineering./.