The Law on State-owned Enterprises will expire on July 1, 2010. More than 1,500 State-owned enterprises of Vietnam will have to change their operating forms and operate in line with the Law on Enterprises.
Sluggish transformation
State-owned enterprises are now holding a majority of the country’s resources and are operating in many crucial economic fields such as oil, gas, electricity, cement, steel and mining. There are only several months before business entities begin to operate under the market regime and in line with the Law on Enterprises. However, the restructure of State-owned enterprises remains lethargic and privatisation plans do not have any breakthrough changes. The model of the State economic group is still in the pilot stage while there is no suitable legal regime. On the other hand, although they contribute more than 34 % to the country’s GDP, the return on invested capital ratio is lower than that of other economic sectors.
Another common drawback of post-privatisation of State-owned enterprises is the State equity still accounts for more than 52 % of charter capital. Furthermore, many companies with controlling State-equity still keep their old managerial apparatuses and, as a result, old governance methods are little changed.
“New jar, old wine”...
According to Associate Professor Nguyen Dinh Tai of the Central Institute of Economic Management (CIEM), the restructuring of State-owned enterprises is one the more important tasks, but is a sensitive matter and the most difficult of the transformation from a centrally planned economy to a market regime.
At present, there are two common effective methods. The first is the “shock” method which leads to the quick privatisation of all State-owned enterprises and only suppliers of public services are not privatised. The second, the “prudence” method, is gradual privatisation, ownership diversification and adoption of modern corporate governance. However, either of these methods will need drastic implementation.
Mr Bui Ngoc Bao, General Director of the Vietnam National Petroleum Corp (Petrolimex), said: The main restraint in restructuring many State-owned enterprises is the built-in mechanism. Many State-owned enterprises have transformed to get adapted to the market regime but they encounter the these barriers when they want to have real transformation.
Sharing this viewpoint, Ms Le Thi Hoa of the Bank for Foreign Trade of Vietnam (Vietcombank) said the insufficiency of legal framework for State-owned enterprises after equitisation puzzled not only the enterprises but State management organs as well. In fact, the State still keeps controlling stake in equitised State-owned enterprises and the any actions in corporate governance, autonomy in business operations and sensitivity in decision-making are considerably restrained.
According to Ms Hoa, many State-owned enterprises are almost unchanged in nature. There are little changes in governance and managerial capacity and there are, subsequently, little improvements in business results. Nearly 10 % of equitised State-owned enterprises are operating at a loss.
Complete legal framework needed
Mr Nguyen Bich Dat, Deputy Minister of Planning and Investment, said: Economic restructuring is an urgent matter to create a breakthrough in building a powerful and competitive state economic sector capable of supporting the rest of the economy. To accelerate the privatisation of state-owned enterprises, according to Mr Dat, the Government needs to complete legal regulations on supervision and evaluation of post-equitised State-owned enterprises and force enterprises to make transparent information.
Ms Pham Mai Huong, consulting director at KPMG in Hanoi, said: Enterprises may face more difficulties in approaching financial sources in the coming time. Thus, they need to have plans to improve business administration and adopt roadmaps to pursue effective governance models.
Thi Van
Vietnamese
