SOEs to remain as macro-economic regulatory tool
By Tu Hoang - The Saigon Times Daily
HANOI – State-owned enterprises (SOEs) are still defined by the Ministry of Finance in its restructuring program as an important tool for the Government to stabilize the macro-economy, although many experts have shown disagreement.
In its scheme for SOE restructuring put forward to State agencies for comment, the Ministry of Finance also stresses that SOEs must get stronger after being restructured to become the core of the State economic sector, enabling the State sector to play the leading role in the economy.
In addition, the scheme seeks to ensure that State economic groups and corporations will fulfill their role in setting orientations for development, creating a favorable environment and promoting the development of other economic sectors.
The restructuring scheme also aims at establishing SOEs of large scale, or even international scale.
As such, the scheme still highlights the role of SOEs as an economic regulatory tool, although it has been stated that the State economic sector must compete fairly with other sectors.
However, economic experts and the National Assembly (NA) deputies hold a different view.
Nguyen Dinh Cung, vice president of the Central Institute for Economic Management (CIEM), said though defined as a tool to stabilize the macro-economy, SOEs had made instability get worse, and posed higher risk to the financial system due to inefficient investment and poor business.
The inefficiency of SOEs, coupled with the trend to expand business to other fields such as finance, stock and real estate, and increasingly high financial leverage, causes more risks to not only relevant SOEs, but also the financial system and the overall economy, Cung noted.
Meanwhile, a report of the NA Economic Committee reflecting the opinions of local and foreign economists stressed it is groundless to use SOEs as a tool to regulate and stabilize the macro-economy.
SOEs are holding either monopoly or dominant position in many fields and not under pressure of competition, thus operating inefficiently. They are a reason for macro-economic instability rather than a macro-economic stabilizing tool.
Furthermore, the fact that SOEs are used as a tool to stabilize prices distorts the market prices of related products, making allocation and use of resources become unreasonable and inefficient.
The report added that prices, after restrained for a period of time, lead to huge losses or cross subsidies that cannot be restrained anymore but have to break free. This comes as a great shock to the economy, making the macro-economy more unstable and vulnerable.
In the scheme, the finance ministry admitted SOE restructuring is the hardest process of economic restructuring.
The State still holds a hefty 85% stake in SOEs after the equitization program has been running for over 20 years.
At present, however, the private economic sector and the foreign-invested sector contribute to as much as 70% of the country’s gross domestic product (GDP).