Difficulty in Transforming SOE Models

Under the direction of the Prime Minister, ministries and local authorities will have to report on the progress and reshuffle plans for loss-making and poor-performing companies before December 31. This will be the basis for the Government to focus on important sectors that need the State ownership presence. In addition, the Government requested responsible units to specify business structures and define core business lines, and performance improvement plans. Ineffective business lines will be removed and resources will be focused on core businesses.

 

A top concern is how SOEs will be reformed: The State will hold its capital or transfer it to such companies or to change managerial apparatuses? According to experts, if SEO reform is considered an opportunity to strengthen corporate structure, companies will be granted more autonomous power in capital management and key personnel. Doing so, they will be more confident to make important decisions instead of waiting for new instruction from superior administrative units.

 

Administrative apparatus reform is not a short-day work but it requires time to train and retrain personnel. A business leader needs to have a good time to work with their post before officially appointed. At present, the conversion of more than 1,500 SOEs into one-member limited liability companies may lead to a worse shortage of business administrators with excellent corporate governance skills.

 

Also, according to the Enterprise Reform Department under the Government Office, legal documents related to SOE model transformation must be amended or supplemented to suit the Decree 25 on converting SOEs into one-member limited liability companies. Specifically, competent authorities need to give instructions to personnel management, payroll and bonus regimes at one-member limited liability companies to ensure the new legal basis for these matters following the transformation.

 

Transforming operating models, organisational structures and personnel structures to boost up performances is crucial at present. According to many economic experts, in the current context, the State should retain essential economic sectors like finance - banking, electricity, explosive or other industries closely related to the national security while give a wider, fairer room for all economic sectors to compete in other industries. The industry leader must be the most capable one, regardless of State-owned or private-run.