SOEs restructuring begins from changing way of thinking

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VietStock FI English - 36 month(s) ago 3 readings

Vietnam so far has affirmed that the state economic sector continues playing the most important role in the national economy. Meanwhile, economists have continuously urged to restructure state owned enterprises (SOEs).

In 1992, Vietnam kicked off the process of reforming SOEs when pushing up the assignment, sale, contracting, equitization and dissolution of enterprises. Meanwhile, restructuring SOEs remains a hot story 20 years later.

At the workshop on the situation of the Vietnamese economy held by the National Assembly’s Economics Committee two weeks ago, the phrase of words “SOE restructuring” was repeated in the speeches of all orators. They not only have agreed that Vietnam needs to carry out the SOE restructuring, but have also affirmed that the restructuring needs to be implemented urgently.

The report released by the Committee for Enterprise Renovation and Development in 2010 showed that SOEs are holding 70 percent of the total fixed assets of the national economy, controlling 20 percent of the investment capital of the whole society, using 60 percent of the credit provided by commercial banks. They are also using 50 percent of the state’s investment capital and 70 percent of ODA (Official development assistance) capital.

The total stockholder equity of the 21 state owned economic groups and general corporations, not including Vinashin’s, had reached 540,701 billion dong by February 2011.

Though holding big assets and using big resources of the society, the state economic sector does not bring big achievements to the national economy. SOEs only create 37-39 percent of GDP, generate 4.4 percent of total jobs. Meanwhile, the productivity and output increases are always lower by 10-14 percent than that of the private economic sector.

Meanwhile, analysts have pointed out that a half of the contribution by SOEs to the GDP came from the national natural resources exploitation such as oil and gas, coal and minerals.

Vietnam so far has affirmed that the state economic sector continues playing the most important role in the national economy. The most important fields of the national economy are being undertaken by SOEs.

However, economists have pointed out that when assigning SOEs the role of leading the national economy and entrusting the enterprises with too heavy tasks, the State not only puts a heavy burden on the economic sector, but also creates many problems to the national economy, including the inefficient allocation of the national resources and the existence of an unleveled playing field for different economic sectors.

Commenting about the SOE restructuring in the last 20 years, Dr Phan Dang Tuat, Head of the Industrial Strategies and Policies said at a workshop recently that what Vietnam did in the last 20 years was just separating, merging or dissolving enterprises. This means that in the last many years, Vietnam only focused on changing the model of enterprises.

Meanwhile, the conclusion by the Communist Party’s Politburo about the socio-economic situation in 2011, when mentioning the SOE restructuring, said that it is necessary to push up the equitization of economic groups and general corporations, request SOEs to focus on their main business fields and not to invest too much in non-forte business fields

Professor Vo Dai Luoc has pointed out that he knows no market economy in the world which considers state economic sector as the motive force of the national economy.

Luoc believes that the State should not do business for profit, while doing business should be done by private enterprises. The role of the State is to ensure the macroeconomic stability. “The SOE restructuring should go that way,” Luoc said.

Sharing the same view, other economists say that SOEs should not get involved in all the phases of the national economy’s value chain, but only in the most important fields, or the fields refused by the private economic sector due to the low profitability. Once the private economic sector gets strong enough, SOEs should focus on serving the works for public interests.

Truong Dinh Tuyen, former Minister of Trade, believes that it is necessary to put SOEs into a real competition and not to give preferences to the enterprises, and it is necessary to change the management mechanism of SOEs. However, this would be impossible if the State still holds 70-80 percent of stakes at the enterprises.

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