Thursday, December 13 2018

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Lawmakers discussed SOEs management

Update: May, 28/2018 - 17:00
Chairman of the NA’s Economics Committee Vũ Hồng Thanh presents the report on the implementation of policies and laws on the management and use of State capital and asset in enterprises and the equitisation of State-owned enterprises during 2011-2016. — VNA/VNS Photo
Viet Nam News

HÀ NỘI — Many State-owned enterprises (SOEs) are not using their resources to the best of their abilities, according to a report discussed at the National Assembly Monday.

Lawmakers revealed a number of businesses are running at a loss, and are wasting state funds and not operating effectively.

The report looked at policies, management laws and the use of capital and assets of SOEs from 2011 to 2016.

Chairman of the NA’s Economics Committee Vũ Hồng Thanh said SOEs contribute to regulating and stabilising the macro-economy, ensuring the major balances of the economy and promote economic and social development.

By the end of 2016, there were 583 enterprises with 100 per cent state’s capital and 273 joint-stock companies.

Most of these SOEs are making profits, and their profits are rising; there are those with high profit margin ratio such as the Viettel Military Telecommunications Group (Viettel)  (43.5 per cent), Vietnam Rubber Group (30.4 per cent), and the Việt Nam Sugarcane  and Sugar Corporation (29.9 per cent).

According to the report, the efficiency of SOEs is low compared to private enterprises and FDI enterprises.

There are still ministries that are in charge of SOEs that have not fulfilled their responsibilities.

The supervisory board of the NA pointed out a number of violations in the management and use of capital and property.

Some violations left serious and long-term consequences, which are often difficult to handle financially and forced the authority to hand out discipline measures to relevant individuals.

Figures from the report also revealed the total liabilities of SOEs are high, rising by 26 per cent compared to 2011 (from nearly VNĐ1.3 trillion (US$56 million) to more than VNĐ1.6 trillion).

By the end of 2016, SOEs’ overseas investment was more than US$7 billion, of which 25.5 per cent were reported loss.

Meanwhile, the Government was slow in detecting and preventing wrongdoings, the report said, adding that the Government is responsible for exercising the right to represent the owner, to exercise State management, to direct the use of State capital and assets at the enterprise and to equitise SOEs.

During the 2011-2016 period, the Government has made many efforts to set up a legal basis for the management of assets and capital in SOEs and to strengthen the management to contribute to the development of enterprises, increasing capital and assets, preserving capital, raising business efficiency and remittance into the State budget. But the effect was not high. There were cases of wrongdoings that were detected tardily, causing serious economic consequences.

But on the flip side, the restructuring of enterprises with focus on SOEs have had few positive results.

According to the report, there were 571 SOEs that had been equitised in the last six years. Business indicators in most of these enterprises increased after the sale of State capital, total assets increased by 39 per cent, the average income of workers increase by 33 per cent.

However, the report indicates that the equitisation process is not going well everywhere. The ratio of State capital held in joint stock companies is still high. The number of shares offered to the public was low compared to the plan of equitisation of enterprises, there were many corporations where the ratio of selling out was very small (only about 1 -2 per cent of charter capital).

According to the supervisory board, the main problem of SOEs in equitisation is wrongdoings in enterprise value determination.

When determining the value of an enterprise for equitisation, there are cases where the enterprise does not calculate or mistakenly calculate the value of the land use right, thus causing the land price to be determined to be lower than the market price. After the equitisation, the enterprise does not put the land into use but, instead, changes the purpose of land use and fails to fulfill its financial obligations to the State as prescribed, the report said.

On behalf of the supervisory board of the National Assembly, Thanh suggested the National Assembly strengthen the supervision and issue resolutions on raising the efficiency of the management and use of state capital and assets and the equitisation of State-owned enterprises.

The board also suggested the Government strictly ban wrong enterprises value determination and strictly deal with wrongdoing regarding this matter.

SOEs equitisation and land use right

Deputy Hoàng Văn Cường, from Hà Nội, said there were three reasons for loss of State capital and property in SOEs: ineffective business; spending State’s capital for individual profits and low asset valuation.

“No matter how bad the business is and how much loss it caused, nobody has to take responsibility or has to go to jail for poor management,” Cường said.

“When many businesses make reports in order to ask for an increase in salary and capital, they immediately report that they were making profit. None of them report any losses.

"But when reporting on financial matters in order to pay tax, they would report they are not making profits,” he said.

Deputy Vũ Tiến Lộc, chairman of the Việt Nam Chamber for Commerce and Industry, said SOEs were going in the opposite direction of development.

Vietnamese SOEs’ Incremental Capital Output Ratio (ICOR) was much higher than that of other economic entities. In 2016, SOEs only made $1 growth out of each $10 capital, while that number of FDI enterprises was $2, and of non-State enterprises, it was $1 of each $6.

Lộc said the inefficiency of SOEs was also seen in many other countries. Overlapping regulations, management capacity, were only part of the reasons for such weakness. The major reason was a lack of motivation for development among these SOEs, he said.

“If the State still holds too much of the enterprises’ capital, other reform efforts would not mean much,” he said.

He said the right path is to foster SOEs’ equitisation process and State capital divestment.

Regarding land use among SOEs, deputy Nguyễn Minh Sơn from the southern province of Tiền Giang stressed the most concerning issue in enterprises’ equitisation process is the land use rights and land value, citing the NA report’s finding that most SOEs that had been equitised during 2011-15 did not count their right in renting land into enterprises’ value.

“It’s necessary to take into account land use rights and land rental rights to determine correctly the value of enterprises during the equitisation process to avoid State capital loss,” Sơn said.

Responding to such queries, Minister of Natural Resources and Environment Trần Hồng Hà said the main reason for State asset loss was because enterprises’ values were not properly calculated before equitisation and land resources were not properly managed and calculated.

He said the ministry had suggested that the Government issue a decree in 2017, which requires enterprises, when being equitised, to have proper plans in place for the land they are in charge of. The minister said such solution would help revoke all the land resources that are used or managed inefficiently. — VNS

 

—VNS

 

 

 

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