It's Time for Vietnam to Set up Multi-ownership Economic Groups

 

 

In 2005, 720 enterprises out of 754 State-owned enterprises were reorganized (95.49 per cent of plan), 600 out of 724 SOEs were equitised (82.87 per cent of plan). This was the first- year implementation of the Government’s Decree No 187 on: equitising on the basis of disclosure, auctioning stock through financial centres. Such a result is a good start. SOE restructuring gave birth to some corporations such in the areas of post and telecommunication, coal, finance, insurance, garment and textile, while converting some corporations into parent and subsidiary companies.

 

Obtaining such good results was due to strong efforts in implementing the Directive No. 45/CT-TW of the Politburo on promoting, restructuring, renewing, developing and enhancing the efficiency of SOEs. Equitisation has not gone according to the set plan because this was the first year of implementation of the Decree No. 187; the biggest difficulty comes in assessing enterprises. This is the first time stocks have been sold in public; the size of equitised enterprises is larger, and relations are more complicated. In addition, there remain shortcomings of enterprises that have not been settled yet, resulting in negative impacts. Another reason is that equitisation has not connected with administrative procedure reforms, making equitisation procedures more complicated.

 

In 2006, the Government has pledged to focus on fulfilling SOEs restructuring under the Resolutions of the 3^rd and the 8^th (IX session) of the Vietnam Communist Party Central Committee. The key task is accelerating the equitisation of most enterprises that the Government does not need to hold shares in. There will remain 1,800 wholly state-owned enterprises by the end of 2006. These will be transformed into one-member State limited liability companies and merged into State-owned Corps or conglomerates. As long as the equitisation of such SOEs, enterprises that the Government does not need to control will be sold, there remain only 900 of those.

 

We will continue to perfect State-owned Corporations whose capital is controlled by the Government and transform them into parent and subsidiary companies. The Government will only maintain SOEs in some core sectors. We will focus on solving difficulties in policy to facilitate equitised SOEs’ operation. It is necessary to create a fair legal environment for multi-sectoral enterprises and conditions for them to integrate into the world’s economy.

 

 

*Quickly concretise the Common Enterprise Law, and issue documents guiding the implementation of that Law.

*Further promote dissemination (of the said above Resolutions) to gain support of the whole society and make enterprises realise their benefits in order to accelerate SOEs restructuring with equitisation being a key measure.

 

*Focus on settling debts left by history, facilitating the development of enterprises. This is the period of equitising big corporations and establishing multi-ownership conglomerates. Key task is SOEs equitisation.

 

*Create a good environment to help debts and assets trading companies and finance investment companies operate more effectively, thus facilitating the operation of equitised enterprises.

*Better implementing the Decree No. 132 by the Prime Minister on ownership to enhance rights of management board of Corporations. It is a condition to gradually separate the managing role of ministries and provinces from enterprises.

 

 

We must say clearly that SOEs will hire directors including some who will hire foreigners. It is necessary but only applied to corporations or companies requiring high-tech production and complicated management expertise that Vietnamese have not undertaken yet. However, it requires policies including those on the relationship between management board and Director-General; rights of Director-General to make his tasks and choose his staff; policies connecting rights to duties, effective policies on sanctioning and rewarding. It is unreasonable that the salary of the Director-General would be US$3,000 per month, however that of president of the management board and Deputy Director-General is VND3 million and VND5 million, respectively.

 

 

It is true. There are now 2,600 equitised SOEs of which only 25 enterprises have received foreign direct investment. Recently, 99.9 per cent of Vinamilk’s offered shares (10 per cent of the company’s existing shares) have been bought by foreigners because it is a large-scale and effectively operated enterprise.

 

Another reason is that ownership used to be limited and not a surplus 30 per cent of shares which is a small portion, not ensuring direct investors rights to manage enterprises and create more profits, therefore they did not pay due attention to it. The Government has recently implemented changes, allowing SOEs to sell up to 49 per cent of their shares. In addition, some big and effectively operated enterprises have been chosen to equitise (such as Vinaphone, Mobiphone- which assuredly will attract foreign investors’ attention). This is an active decision to encourage investors to buy shares.

 

 

The form of parent and subsidiary company is very common in many countries. However, in general theirs are different from ours. The difference is that parent companies give birth to subsidiary ones or they compete to become independent from each other while our enterprises are united to form Corporations and then transformed into parent and subsidiary companies.

 

However, we are reorganising SOEs, therefore, it is essential to change our form in line with the world’s. It needs further discussion and close guidelines to make both parent and subsidiary operate effectively.

 

First, offices of corporations which have enough conditions will be transformed into parent companies.

 

Second, some independent companies and offices of corporations will be transformed into parent and subsidiary companies. In this case, there are some enterprises which are to be equitised will be reorganised and merged into parent companies. There will not many such cases and it is not a way to elude equitisation.

 

 

The establishment of powerful conglomerates is an unavoidable trend during the country’s integration into the world economy. Therefore, the establishment of such conglomerates in Vietnam follows the spirit of the third and ninth Central Committee’s Resolutions. It is necessary that State-run conglomerates should be made multi-ownership ones.

 

Additionally, conglomerates require different financial, monitoring and personnel mechanisms and business strategy from those of corporations to make them really strong.