Ineffective operations cause huge losses
Minister of Finance Vuong Dinh Hue says despite advantages in resources, there remain shortcomings in SoEs operations, including low competitiveness and ineffectiveness.
In 2009, SoEs used VND2.2 in capital to create VND1 of revenue, while private businesses needed only VND1.2 and FDI enterprises only VND1.3. SoEs’ Return on Equity (ROE) has never exceeded six percent over the past ten years, but it is estimated at around 10 percent among FDI businesses, he cites.
He analyses the bad financial situation of some State-owned groups, which causes losses and potential financial imbalances, as well as their ineffectiveness in regulating the macroeconomy and poor business management capacity.
Hue points out the reasons for the shortcomings, including the lack of renovations and business growth models, the impact of the global financial crisis and economic downturn.
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SoEs have cared too much about expanding their operations rather than improving effectiveness and competitiveness, he says, adding that poor development strategy is another factor behind their management problems.
Many SoEs have invested in risky fields or are too dependent on loans, he says.
The Minister also attributes the problems to monopolies, and outdated policies and mechanisms for business management, which kills the motivation for sharpening competitiveness.
Judging from the current global and domestic economic situation, Hue says, restructuring SoEs is considered the most difficult task, especially when the national financial system is not strong enough to stimulate the process.
Expenses for restructuring SoEs are likely to place a heavy burden on the economy and increase public debts, he stresses.
Minister Hue refers to solutions mentioned in the project to restructure SoEs, including introducing criteria for grouping businesses according to their fields of operation and the ratio of State-owned capital, promoting equitization, rearranging and restructuring each business to improve their business management, strengthening State management over the process, and restructuring agricultural and forestry companies.
Dr Pham Viet Muon, Deputy Head of the Government Office and Deputy Head of the Standing Steering Committee for Business Renovation and Development, says it is a must to complete the policy for restructuring SoEs to improve their production and business effectiveness.
It is also necessary to reduce the number of SoEs with 100 percent State ownership from the current 1,309 to 692 by 2015, Muon says.
According to Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry, the project to restructure SoEs is yet to pay off for lack of suitable development models.
He recommends increasing pressure on SoEs by creating fair competition between businesses, which he says will force them to find long-term growth models to improve their competitiveness.
Regarding management, he says SoEs should be in the vanguard of applying modern, transparent, and effective management models, while State management and State ownership should be separated from each other.
The Government has already established a Steering Committee for restructuring SoEs and improving the legal framework for business equitization.
Dr Loc proposes that the Government create favourable conditions for merger and acquisition, and improve the business environment by ensuring transparency and equality in the use of resources. Source: VOV