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State capital laws need more teeth

Update: July, 21/2014 - 09:47

The draft state capital management law needs to provide a detailed blueprint to be effective, Do Van Ve of the National Assembly Committee on Science and Technology told Thoi bao Kinh te Viet Nam (Vietnam Economic Times).

Do you think the draft Law on Management and the Use of State Capital in Production and Business will be an effective tool to ensure the proper use of the state budget?

To achieve that objective, I think that the law needs to clarify and cover many points, as well as to lay down strong requirements in the management of state capital by enterprises.

In addition, it is imperative to carry out stronger restructuring campaigns among State owned enterprises (SOEs), while the Law on Management and the Use of State Capital in Production and Business will become an important tool in implementing the restructuring campaign.

Will you please further elaborate on the points that the law should focus on?

Firstly, the law should further explain what the ownership representative office means.According to various documents, there are two existing main models in our country. The first one - is a government office that acts as the sole ownership representative of the SOEs (the top down pyramid). In the second one - the ownership representative will divide into three tiers, from the Prime Minister, the Ministries and the Provincial People's Committees (the bottom up pyramid).However, if we want to carry out a drastic reform of the State owned management, in my opinion we should choose one model.

Secondly, it is imperative to put the SOEs in the context of the market economy. However, in the draft law, one of the objectives of using state capital investment in business is to enable the State to orientate, adjust the national economy and stabilise the macro economy for the requirement of each period of development. With this objective, it is impossible to ask the SOEs to follow market rules.Regarding the issue of increasing enterprise charter capital, when I read the draft law I felt something was missing in the section. It says that only enterprises with good production performance using 100 per cent of state capital investment can ask for additional charter capital.

In my opinion, conditions to increase charter capital must be more specific than saying "good production performance." For example, to what level of satisfaction?

As we all know that our state budget is facing difficulties in collecting revenues, if the law allows enterprises with 100 per cent charter capital from the state budget to increase their charter capital, it will add more of a burden on our state budget.

What do you think about the Chapter on evaluating the effective use of State capital in enterprises?

I think it needs to be revised and provide more information. There are various criteria to determine whether this enterprise is using state capital effectively or not. The most common criterion is capital gains. But this criterion is not mentioned in the law. In addition, the law should also cover the rights and obligations of the enterprise's management board and the CEOs.

Do you want to add some more provisions to the law?

I think the law should have at least one article about the definition on the effective use of State capital. For example, how to evaluate the effective use of State capital in public utilities. Or what about business enterprises operating entirely on market rules and others? — VNS

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