SOE Reform Speed Still Too Sluggish

Vietnam’s economic reform is still being carried out vigorously. Particularly, the formation of market mechanisms to meet entry conditions to regional and international trade organisations is highly appreciated.

 

Economist Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), said Trans-Pacific Partnership (TPP) and other free trade pacts to which Vietnam is negotiating are bring in a lot of opportunities for the restructuring programme of Vietnamese economy and SOEs. However, until this time, SOEs are still too cautious to open their door.

 

Remarking on SOE reform, economic specialist Pham Chi Lan said SOE reform is fairly slow, even messy and vague. She added that Vietnam had missed an opportunity to reshuffle SOEs at the time of joining the World Trade Organisation (WTO) to enhance their transparency to improve the business environment. Now, Vietnam has another chance to do this again when it enters TPP.

 

Vietnam is seeing a great opportunity joining TPP and final obstacles still come from the State economic sector. Accordingly, if TPP international regulations and standards applicable to the State economic sector are adopted, pressures on the process of SOE restructuring will be higher, requiring more effective and systematic actions.

 

For its part, the State has also taken some steps to reduce the shareholding ratio in big SOEs, which is much expected by foreign investors. However, many SOEs still fear competitive pressures, refuse to change their strategies or simply want to protect their monopolistic positions.

 

While the Government and State agencies are trying their best to push up economic development, SOEs themselves become obstacles to development as they are the source of huge bad debts in the economy. Thus, according to experts, it is essential to change the view on SOEs' roles and allocate supports to the private sector.

 

Although the number of SOEs has dropped from 12,000 in 1990 to 5,600 in 2015, the sector still takes up nearly a half of public investment, 60 percent of bank loan value and more than a half of the total bad debt in the economy.

 

Dr Doanh said SOEs are currently not competitive enough to play a dominant role in the economy. They use so many resources but their contributions are negatively disproportional. For the sake of the economy, the Government should encourage the private sector.

 

Dr Nguyen Dinh Cung, CIEM Director, said that the State economy is still regarded as the mainstream of the economy. This point of view needs to be changed because it will affect the planning process and policy enforcement and engender disadvantages to the private sector.

 

To meet economic development demands, the SOE equitisation is a must. This process is going too slowly and the result is disappointing although the Government has attempted to accelerate the restructuring. Issues rooted from local interests and group interests remain major hindrances to SOE reform process in Vietnam.

 

Sharing SOE equitisation experiences with Vietnam, Ms Fale Maly from the OTB Office (Office of Tony Blair), the United Kingdom, said that the Government of Vietnam should clearly define State ownership objectives, outline a solid roadmap for SOE reform and build appropriate tools and mechanisms for implementing this roadmap.

 

The clear definition of reform is of very important significance to the way to implement the reform process. Currently, in some cases, the equitisation is primarily aimed to raise capital for business operations rather than reduce State ownership ratios or promote private sector development. She added that is important to have public private partnerships (PPP) and have a balance between the State and enterprises. If the SOE reform does not promote the private sector, it will lead to a shortfall.