State owned enterprises – naughty boys that do not get spanked

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VietnamNet English - 33 month(s) ago 2 readings

State owned enterprises – naughty boys that do not get spanked

VietNamNet Bridge – Vietnamese state owned enterprises (SOEs) are believed to have five special privileges, which are their “absolute advantages” in doing business.




In principle, businesses would benefit if they can make profit, and would suffer if they take loss. However, the principle is not applied to SOEs, especially big state owned conglomerates.

Dr Nguyen Dinh Cung, Deputy Head of the Central Institute for Economic Management (CIEM), noted that if SOEs make profits, they would pocket the money, but if they take loss, they would still pocket money and put the burden of the loss on people and the society.

Dr Vu Dinh Anh, a well known economist in Vietnam, said that SOEs have five big privileges, which are the absolute advantages in the competition with the enterprises from other economic sectors.

Firstly, they do not fear to go bankrupted one day, even though if they take loss for a long time.

Secondly, they can turn the “state monopoly” into “enterprise monopoly,” which allows them to dominate the market and control the prices. In this case, the “power” can turn into “cash.”

Thirdly, they can take full advantage of the “ask and grant” mechanism. When they complain about difficulties, they would get the support

Fourthly, SOEs can enjoy preferences in accessing bank loans. Economists have noted that SOEs try to borrow as much money as possible, while they do not have to think much about what they should do to be able to pay debts and develop.

And fifthly, unlike private businesses, SOEs do not fear the inspections or the supervision from state management agencies. Therefore, they have been described as the naughty boys, who are sure that they would not be spanked.

Anh believes that it is necessary to reconsider some privileges enjoyed by SOEs, especially state owned conglomerates and general corporations. These include the right to define prices on important goods and services (petroleum, electricity and water), the right to access land fund at surprisingly low costs.

Especially, according to Anh, SOEs have many strange rights: they can ask for refinancing after they take loss for a long time. Besides, they can “buy high and sell cheap,” and still can have high income, even though they take loss.

Sharing the same view, other economists have called on to reconsider the role of SOEs in the national economy.

Amid the criticism by economists, Tran Xuan Hoa, President of the Coal and Mineral Industries Group (Vinacoal), a typical state owned conglomerate, replied that his enterprise has not enjoyed any preferences.

He showed his surprise to the opinion that SOEs have bigger advantages than others in accessing the natural resources and the land fund.

Hoa said that to date, the Prime Minister has two times released the documents, assigning Vinacoal to develop the titanium industry on the area of 1500 square kilometers in Binh Thuan, Binh Thuan and the north of Ba Ria-Vung Tau. However, to date, the conglomerate has not got any license, and has not carried out the exploitation on any square meter of area. Meanwhile, local authorities have granted thousands of licenses on titanium exploitation to other enterprises.

Hoa emphasized that this year proves to be a very tough year for enterprises. Vinacoal, which is believed to have privileges in accessing bank loans, still has to pay the sky high interest rate of 18.5 percent.

Meanwhile, subsidiaries in conglomerates have been informed that the land use tax has increased by 10 times.

The economists did not argue with Hoa, but pointed out that the fact that the government assigns Vinacoal to preside over the titanium industry development plan should be seen as a “privilege” for the economic group already.

Source: TBKTVN

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