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Restructure of State firms aims for sustainability

Update: February, 15/2012 - 11:22

HA NOI — In restructuring State-owned enterprises (SoEs), future growth and efficiency gains must be pillars behind ensuring that the entity remains financially sustainable, said attendees at a conference held in Ha Noi yesterday.

Addressing the conference on global lessons for restructuring financial groups, co-organised by the Ministry of Finance and Bao Viet Holdings, Finance Minister Vuong Dinh Hue said that this year's priority for the Government was to restructure the economy.

"We want to improve the efficiency of public investments, the competitiveness and effectiveness of SoEs and the financial system. This supports a key role of the public sector, in which SoEs play an important part in contributing to the sustainable development of the economy," said Hue.

He added that restructuring, especially in corporate governance and cost reduction, would be very important for SoEs to improve competitiveness in the context of economic difficulties.

Adel Meer, the International Financial Company (IFC)'s principal investment officer in the Mekong and Thailand, said besides constant improvement of corporate governance, staff training, recruitment and retention were key in managing successful companies, especially those going through a transformation.

Adel said that effective risk management was also the cornerstone for any successful company.

"For a financial institution which tends to be highly leveraged, market oriented and subject to increased scrutiny from both regulators and stakeholders, this pillar of the organisation is probably the most important to strengthen," he said.

He added that restructured SoEs must also look at ways in which operations may be streamlined, costs minimised and operational capacity expanded.

At the conference, managing partner of McKinsey & Company Vietnam Marco Breu said that the country was facing a productivity challenge to be able to gain sustainable growth.

To overcome the challenge, Marco said that productivity improvements by the SoE sector were inevitable and critical, especially in the context of more limited access of capital and increasing competition.

Viet Nam had been one of the fastest growing economies in Asia over the past years. H owever, looking at the current pace of productivity growth and continued sector allocation, the country's economic growth might slow down to 4.6 per cent yearly, he said.

"A productivity revolution will be necessary to sustain the current pace of economic growth," he added.

Macro believed that increasing the capital efficiency of SoEs could contribute significantly to the country's overall capital efficiency.

Groups and corporations

State-owned groups and corporations will be taking measures to reduce their management budgets by 5-10 per cent from now until the end of the first quarter, Finance Minister Vuong Dinh Hue said.

Signing a pledge based on the management of budget reduction yesterday, Bao Viet Holdings has become the first corporation to implement such an activity, aimed at meeting a Government directive on enhancing the business effectiveness of SoEs.

"The reduction management budget can save Bao Viet Holdings roughly VND145 billion (US$6.9 million)," Hue estimated.

He said that Vinatex, Electricity of Viet Nam, Vinalines and Petrolimex would also make the move next week. — VNS

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