Although they take up 70 percent of social investment capital, 50 percent of State-funded capital, 60 percent of the bank credits, and 70 percent of official development assistance (ODA) capital, State-owned enterprises (SOEs) contribute just 37 - 38 percent of the country’s gross domestic product (GDP), the Ministry of Planning and Investment said. Therefore, the restructuring of SOEs, especially the largest economic groups and corporations, is becoming increasingly urgent in Vietnam.
Lack of motivation
At present, Vietnam has more than 1,200 SOEs, which are called one-member limited liability companies in legal documents. They use a vast majority of natural resources, although 12 percent of SOEs report operating losses, according to the Ministry of Planning and Investment. Although up to 25 percent of businesses in Vietnam report loss, the average value of loss incurred by an SOE is 12 times more than that of a non-State enterprise. According to the Enterprise Reform and Development Committee under the Central Institute for Economic Management (CIEM), a unit of the Ministry of Planning and Investment, ineffective investment management mechanism has bitten into the investment efficiency of SOEs. Outcomes produced by SOEs are not commensurate with the scale of resources they have spent.
A core reason is the typical characteristic of SOEs: Not pursuing the objective of maximising the margin on investments as other economic sectors. The current SOE structure is quite irrational and the performance is distant from policies. The process of SOE restructuring is currently confined to reducing the number of SOEs and it has thus not significantly affected the mechanism of allocating State resources, restructuring industries and boosting performance of SOEs. The management and monitoring of SOE performances are not very good either.
Policy advantage and support of equity owners, the State, imperceptibly reduce the motivation of enhancing SOE performance. The mechanism assessing SOE performance fails to generate warnings and inhibit the ineffective use of State assets and investment capital.
According to experts, to improve performance, SOEs must be placed in a competitive environment where the State roles as equity owners are necessarily separated from its roles as regulatory agency. Government measures must help SOEs raise operating efficiency and productivity, not increase short-term profits. SOEs must be subject to the same competitive pressures as other economic sectors.
Speeding up privatisation
Mr Nguyen Dinh Cung, Deputy Director of the Central Institute for Economic Management (CIEM), said: The most important contents in SOE restructuring are publicity and transparency of information. This will force business leaders to behave in accordance with the market mechanism. A solution to enhance the competitiveness of SOEs is to step up SOE privatisation and reduce the number of wholly State-owned companies.
For SOEs the State must manage and use as economic tools, they could be equitised and the State hold the lion’s share. Therefore, the central work for the upcoming period is to continue reviewing and classifying SOEs to facilitate the reshuffling.
|
Dr Tran Du Lich, Deputy Head of HCMC’s National Assembly Deputy Delegation
“SOE restructuring which was initiated at the third meeting of the 11th Central Party Committee is a major task for the coming time. However, it is a daunting challenge when the stock market is in a bearish trend. Therefore, to restructure SOEs successfully, the Government must take very specific steps.”
|
Finance Minister Vuong Dinh Hue added that in order to serve economic development objectives ratified by the 11
th National Party Congress, the financial sector defines its major tasks are the completion of corporate financial policies and regimes and acceleration of SOE reshuffling process, a move to change growth model and improve growth quality.
To troubleshoot problems blamed for sluggish privatisation of SOEs in the past (the number of equitised SOEs met only 25 percent of the target set for the 2007 - 2010 period by the Prime Minister), the Ministry of Finance has suggested the Government approve the newly submitted Decree 59 to replace Decree 109 on transforming wholly State-owned enterprises into joint stock companies. Key points to be resolved include land valuation, determination of strategic shareholders and corporate valuation.
The SOE restructuring, including the speeding up of SOE reorganisation, has been progressing at a snail’s space in recent years. It is essential to synchronously reshuffle SOEs, including the restructuring of financial and capital markets. In addition, the purpose of equitisation is to enhance the quality, efficiency and corporate governance and to select really capable strategic investors with well-recognised position not only in Vietnam but also in the world to boost operating quality after SOEs go public.
Vietnamese
