Vietnam may see a serial collapse of State-owned enterprises (SOEs), which remain as poor operations as remnants from State subsidization, and cannot catch up with the country’s rapid global integration process, according to a senior economist of the National Assembly (NA).
The possible effectiveness of the draft common Investment Law and unified Enterprise Law scheduled for 2006, along with the Commerce Law and Competition Law, is to bear radical changes in the local business environment, Dr. Dang Van Thanh, Vice Chairman of NA’s Economic and Budget Committee, stressed.
The bills, particularly the Enterprise Law (EL), will create an equal playing ground for all economic areas including private ones, joint ventures and SOEs and therefore, the competition will be very fierce, he said.
Furthermore, in realizing bilateral and regional commitments, Vietnam has opened the “door” to outside in several sectors and is too widen the door in industries like consumer goods, finance, banking and insurance are to further open pursuant committed routes.
The most important thing, thus, is to change awareness of enterprises’ managers for a better preparation as many of them have so far, however, showed, ironically, glacial responses to the battlefield, Thanh stressed.
He took an example of two enterprises, one private owned and one State-owned, in a southern province. While the first, run by a married couple, who directly join hands with workers, reports a return on equity (RoE) at 15-20 per cent and is planning a production expansion, the other, whose managers represent a typical bureaucracy of sitting in the office and traveling by car, posts RoE of only 1 per cent and plans production reduction due to lack of market and rising input cost although its capital triples or is four folds over the first.
“Those still stay poor management or rely on so-called “beg-give” mechanism (expecting subsidization from the State) will surely drop out from the game, and that will be normal progress of the development,” Thanh said.
The question for the Government is how to limit it, not prevent it at any cost, to create a healthy environment, he added.
In related development, during discussions on EL at the ongoing NA sitting on November 5-7, deputies complained that application procedures and rules on business condition such as environment and hygiene remain unclear in the enterprise bill and have caused difficulties to entrepreneurs.
Responsibilities and rights of general directors, directors and presidents of administrative councils of fully State-owned enterprises (SoEs) should be further clarified in the bill, some said.
A majority of legislators wanted more concrete articles on the role of local administrations in State management towards enterprises so as to make the bill more feasible.
Many raised concerns over the slow progress made in the SoE equitisation process and fully supported the bill's deadline of four years for SoEs to turn into limited liability or joint-stock companies.
Some however said the bill should make it clearer regarding the equitization process such as what industries and services will not be equitized and which industries and services are necessary to be restructured immediately and how to conduct the process.
In so doing, the bill should make the process go smooth, they said.
Currently Vietnam has around 2,500 SOEs with combined capital of US$20 billion. They operate in 39 important fields and still dominate the local economy.
Last year, the sector contributed up to 40 per cent of the country’s GDP, and paid VND81.7 trillion (US$5.2 billion) to the State budget, or 50 per cent of the total State budget revenues.
However, they also report huge unsettled debts of up to US$2 billion, and many are loss-making.
Youth, VNA
Vietnamese
