MOF re-affirms the leading role of SOEs

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VietnamNet English - 32 month(s) ago 3 readings

MOF re-affirms the leading role of SOEs

VietNamNet Bridge – While economists have called on changing the point of view that state owned enterprises (SOEs) play the leading role in the national economy, the Ministry of Finance (MOF) still keeps the outlook.




State agency and independent economists keep different standpoints

MOF has submitted to the government the plan on SOE reshuffling, where it emphasized the function of the state of regulating the macro economy by using necessary tools, including SOEs.

For the last many years, SOEs have been used as a tool for the government to regulate the national economy. When the government wants to stabilize the market prices, for example, SOEs, which hold the biggest market shares, would be told to sell goods at the prices lower than the market prices, thus helping force the prices down.

The MOF, while affirming the importance of the SOEs restructuring process, has emphasized that restructuring SOEs does not mean to ease the role of SOEs in the national economy, but to make SOEs more powerful so as to become the backbone of the economy.

As such, MOF has once again reaffirmed that the state economic sector will still keep the decisive role in the socialist-oriented market economy.

Prior to that, after a lot of the problems of big state owned economic groups were discovered, economists had called on not to consider SOEs as a macroeconomic management tool any longer. Especially, the MOF’s standpoint also comes contrary to the National Assembly’s Economics Committee’s viewpoint on the issue.

Most of the members of the National Assembly’s Economics Committee have agreed that it would be better not to use SOEs as a tool for macroeconomic management.

The important task that SOEs need to take is to pioneer in the branches and business fields that the enterprises from other economic sectors are not capable to join. These should be the business fields which require high technologies and capital, laying basic foundation for the development of the industries that bring high added value.

Experts have pointed out that it is necessary to impose the market discipline on SOEs instead of giving them preferences, and that SOEs need to compete in a fair way with all other economic sectors.

And in order to do that, SOEs must not be considered as the tool for economic management. It’s clear that when bearing the important task of stabilizing the national economy, SOEs would require the privileges that no other enterprise can obtain, including the “privilege of taking loss.” This, in the long term, would distort the national economy and put difficulties for the management.

Controversy continues

The draft plan by the MOF has surprised many people. Experts have warned that if Vietnam still puts overly high hopes on SOEs and gives wrong functions to SOEs, it would even suffer more heavily.

SOEs now use 70 percent of the total assets and land, while 67 state owned economic groups and general corporations use 15,500 hectares of land. SOEs use 70 percent of ODA (official development assistance) and 60 percent of the bank loans.

However, despite the huge resources, a lot of SOEs still have been taking loss, and they never can lead the national economy as expected. Especially, the wrongdoings at Vinashin, which was called the shipbuilder giant, and Vinalines, the shipping giant, have made the images of SOEs worse in the eyes of people. A lot of SOEs have been found as incurring losses because of the ineffective investment deals in their non-core business fields, such as finance and banking, or real estate.

Truong Dinh Tuyen, former Minister of Trade, now a policy advisor to the government, has said that when Vietnamese private businesses remain fledglings, SOEs need to pioneer in the implementation of industrial policies. |This does not mean that SOEs should be given trillions of dong in capital, so that they can inject in securities and real estate like they did in the past,” he said.

Pham Huyen

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