Weak businesses to be yet dissolved

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VOV News English - 27 month(s) ago 4 readings

Weak businesses to be yet dissolved

(VOV) - The Ministry of Finance and relevant agencies are expected to submit the Prime Minister a financial restructuring project for State-owned enterprises (SoEs) including a plan to dissolve businesses with ineffective operations.

According to statistics from the Party Committee of the Central Enterprises Bloc, many SoEs are running up debts at an alarming rate.

Competition pressure

As a matter of fact, the main source of public investment capital is from the State budget, State credits and SoEs (75 percent).

According to the Central Institute for Economic Management (CIEM), in the 2005-2009 period, more than half of the total investment in the industry and construction sectors was sourced from the State budget but their contributions accounted for less than 40 percent of GDP. In the 2001-2010 period, 52.2 percent of the total investment in the State-run economic sector came from the State budget, making up 24.1 percent of the total social investment amount. Many SoEs are becoming a heavy burden on the national economy as they suffer an average loss of profit 12 times higher than those of non-State enterprises.

A recent survey on 200 biggest Vietnamese businesses conducted by the UNDP showed that the “Top 200” enterprises were speculating in real estate and securities markets without focusing on their major business operations. The appropriation of bad debts among SoEs is hampering the growth of the national economy.

The World Bank (WB) says SoEs account for 60 percent of the fixed assets of commercial banks and credit organizations. Especially, SoE debts up to 70 percent of total bank loans are on the rise.

To improve the operational efficiency of SoEs, economic experts underscore the need to put enterprises in a competitive environment and clarify the role of the State as an owner and manager. In addition, the government should help SoEs improve their operational efficiency and productivity, not just increase their profits in the short run. Competitive pressure should be brought to bear upon SoEs in the same way as on other economic sectors.

Restructuring SoEs should go along with restructuring the financial and capital markets, they say.

Further restructuring or dissolving?

The Ministry of Finance is working out a project to restructure SoEs for the 2011-2015 period with a focus on economic groups and State-run corporations.

Restructuring SoEs aims to develop businesses involved in the key sectors of the national economy to stablize the macroeconomy and ensure national defence and security.

Economic groups and State-run corporations will have to focus on major business operations and retrieve their investment capital from risky business areas such as banking, finance, securities and real estate before May 31, 2015.

The Ministry of Finance says that if economic groups and State-run corporations continue hitting the wall after being restructured, the State should consider restructuring or dissolving them again, and gaining back capital from these businesses to regulate the macroeconomy.

In the first quarter of this year, relevant agencies in charge of managing economic groups, State-run corporations and SoEs will have to submit their restructuring plans to the provincial and municipal People’s Committees.

The Ministry of Finance has been assigned to monitor the SoE restructuring project before submitting it to the PM for approval this year.

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