Challenges for panel on state firms

July 22, 2016 - 09:00

The Government’s establishment of a special committee to manage capital at State-owned enterprises is necessary, but it is likely to face significant challenges in its work, experts said.

Electricity of Việt Nam engineers install a cable in central Quảng Nam Province. The Government plans to establish a special committee to manage State capital in various areas, seeing this as essential in regulating the economy. — VNA/VNS Photo Ngọc Hà
Viet Nam News

HÀ NỘI — The Government’s establishment of a special committee to manage capital at State-owned enterprises (SOEs) is necessary, but it is likely to face significant challenges in its work, experts said.

The Ministry of Planning and Investment (MPI) has drafted a decree on the establishment of the committee, which will help remove conflicts among State functions by separating State ownership performance from policy making and market regulation.

Official data released earlier this year showed that companies wholly owned by the State or in which it has a major stake have a combined asset value of about VNĐ5 quadrillion, or US$222.2 billion. These companies are currently administered by ministries and sectors.

According to the draft decree, ministries and provincial or municipal people’s committees are to transfer the ownership of 30 SOEs in various areas soon, such as in electricity, oil and gas, aviation and maritime and telecommunications, to the special committee.

The 30 companies, mentioned in the box, reportedly account for more than 80 per cent of the total value of State capital and assets.

The special committee will be regulated by the law on management and use of State capital at enterprises, with three major tasks:

- Monitor and assess investment capital and asset portfolios of the State in companies; and analyse and forecast the market situation for State investments.

- Perform all rights of State ownership in the role of an owner or a shareholder in companies.

- Advise the Government and the Prime Minister on using and managing capital for production and business activities of enterprises.

Nguyễn Đình Cung, director of the Central Institute for Economic Management, told local reporters that the committee would operate like a business and its establishment plan was scheduled to be discussed in the National Assembly in the third quarter of this year.

Minister of Planning and Investment Nguyễn Chí Dũng told Pháp luật Thành phố Hồ Chí Minh (HCM City Law) newspaper that such a committee was necessary to handle weaknesses in State management mechanisms for businesses.

Ministries and sectors currently perform the rights of ownership in enterprises, but they are not responsible for the business results. This led to inefficient use of State capital and assets, he said.

Practical measures

Nguyễn Hoàng Hải, vice chairman of the Việt Nam Association of Financial Investors, said the newly drafted decree was “full of practicality”.

It would enable ministries and sectors to “give their whole minds” to State management affairs, and a single committee would find it easier to supervise SOE operations, he told Thời báo Kinh tế Việt Nam (Việt Nam Economic Times).

However, Hải said ministries and sectors might delay passing SOEs to the committee, like they did with the State Capital Investment Corporation (SCIC), for certain interests.

The SCIC, a strategic investment arm of the Government, was established more than 10 years ago to manage State interests in companies and projects. But ministries and sectors still assume a dominant role in administering State utility firms.

“Without drastic action, there is a possibility that very few SOEs will be transferred from ministries and sectors to the committee, even dozens of years after the decree takes effect,” Hải said.

Lê Đăng Doanh, former director of the Central Institute for Economic Management, agreed that it would not be easy to detach SOEs from the governance of ministries since economic groups and corporations were considered “a big pot of rice” for them.

He said besides building the committee, the best way to promote the operational efficiency of SOEs was to accelerate their equitisation process.

Equitisation of SOEs

“Only with equitisation can the problem of ‘privileged groups’ be solved. With the Prime Minister showing determination in resolving this, I hope we will be able to prevent situations where a minister can appoint his daughter or son [to a position in a company],” he said.

“Handing over enterprises is not as easy as moving vases of flowers from a table to one another,” an official from the Ministry of Industry and Trade (MoIT) said on condition of anonymity.

The official said it took the MoIT at least six months to transfer a business with transparent financial situation to the SCIC, so it would likely take several years for ministries to transfer 30 businesses to the committee.

Therefore, the time for establishing the committee should be scrutinised because immediate establishment may slow down or interrupt the SOE equitisation process.

The official also said the committee must have the organisational structure of a “super-ministry” in order to manage various sectors ranging from manufacturing, construction to trading. This may add to the burden of the State budget, while the Government is trying to cut down personnel.

A leader of the Việt Nam National Petroleum Group, who wanted to remain anonymous, said as either ministries or the committee managed SOEs, it was important that the authorities used their power and responsibility well.

They are to create conditions for enterprises to reach their business goals, with transparent mechanisms based on market developments.

“What’s important is the efficiency of management methods,” Đỗ Hà Nam, vice chairman of the Việt Nam Coffee and Cocao Association, told the local press. — VNS

In box:

Thirty SOEs are expected to be managed by the special committee:

  1.  Việt Nam Textile and Garment Group

  2.  Việt Nam Oil and Gas Group

  3.  The Electricity of Việt Nam

  4.  Việt Nam National Chemical Group

  5.  Việt Nam National Coal – Mineral Industries Holding Corporation

  6.  Việt Nam Posts and Telecommunications Group

  7.  Việt Nam Rubber Group

  8.  Việt Nam National Petroleum Group

  9.  Bảo Việt Group

10.  Việt Nam National Coffee Corporation

11.  State Capital Investment Corporation

12.  Việt Nam Railways

13.  Việt Nam National Shipping Lines

14.  Vietnam Airlines

15.  Việt Nam Northern Food Corporation

16.  Việt Nam Southern Food Corporation

17.  Việt Nam National Tobacco Corporation

18.  Việt Nam Paper Corporation

19.  Việt Nam Steel Corporation

20.  Shipbuilding Industry Corporation

21.  Sông Đà Corporation

22.  Housing and Urban Development Corporation

23.  Việt Nam Multimedia Corporation

24.  Airports Corporation of Việt Nam

25.  Việt Nam Engine and Agricultural Machinery Corporation

26.  Việt Nam Urban and Industrial Zone Development Investment Corporation

27.  Việt Nam Forest Corporation

28.  Việt Nam Pharmacy Corporation

29.  Sài Gòn Beer – Alcohol – Beverage Corporation

30.  Hà Nội Beer – Alcohol – Beverage Corporation