Vietnam to restructure poorly performing SOEs to make them stronger

The Prime Minister has just issued Decision No. 360/QD-TTg approving the project « Restructuring state-owned enterprises (SOEs) to restructure poorly performing state-owned economic groups and corporations in the 2021-2025 period to make them stronger.

Talking to a reporter of the SGGP Newspaper, Dang Quyet Tien, Head of the Department of Corporate Finance from the Ministry of Finance said that the project includes equitization that denotes the conversion of a state-owned enterprise in Vietnam into a public joint-stock company or a corporation by dividing ownership into shares, divestment, solutions to improve efficiency, re-arrange SOEs; moreover, it will let so weak SOEs with long-lasting losses to go bankrupt.In the past time, many SOEs have suffered heavy losses as well as they have shown weaknesses and violations of the law, according to Mr. Tien.

However, when the epidemic occurred, the SOE sector was still proved as the mainstay of the country’s economy. Therefore, this restructuring project continues to affirm that SOEs play a pivotal role in the country’s economy, having a very important position in socio-economic stability, ensuring security.He added that in the past, equitization and divestment meant selling off state capital, collecting money, converting all to shrink SOEs whereas this time, the government will focus on shrinking SOEs while keeping core enterprises that performed well and resolutely divesting capital unimportant enterprises. Subsequently, the government will have supporting policies for key enterprises to push them to develop more.

The restructuring and equitization of SOEs will have a roadmap and options. Businesses that are operating effectively, creating many jobs, and contributing to the budget are still major pillars for industries, he said. For example, there will have a roadmap to withdraw the capital of food companies that are making an important contribution to ensuring the balance of supply and demand and food security.A lesson of equitization of Vinafood2 must be remembered because after equitization, this enterprise could no longer promote its role as a company contributing to ensuring food supply and demand in the South as before.In short, the goal of this SOE restructuring and equitization is to restructure in essence, not equitization at all costs, that is, so that after equitization, the enterprise will perform well.Furthermore, Mr. Tien said the Law No. 69/2014/QH13 also needs to be amended and supplemented to be consistent with the Law on Investment, the Law on Enterprises, and other economic laws in order to better demonstrate the investment role of the State.

For instance, the Law No. 69/2014/QH13 introduces four investment areas but omits some key sectors such as commercial banks with the state capital. Commercial banks are an area that provides capital for SOEs and the economy, and this is also an area that ensures national monetary security.Commercial banks with State capital are SOEs and according to the requirements of their growth, the state must invest in them to develop stronger.That is also one of the highlights of this project, a breakthrough and new points compared to the restructuring of the previous period. In another word, the government will reform institutions, perfect policies to promote decentralization, empower enterprises to be more proactive while the government still supervises them and hold control of power.

The state will separate the enterprise’s executive function from the owner’s management function because owners still intervene in the operation of enterprises, while they are only owners of the State’s capital in enterprises, while production and business activities of enterprises are part of corporate governance and are governed by the council. members, business leaders decide.

Owners of state capital are investors. Investors only care about the efficiency of the capital spent, and if they interfere in the production and business activities of enterprises, they will become obstacles.This time, the Government is determined to prevent corporate investors interfere.Mr. Tien emphasized that first of all, it is necessary to develop enterprises in a chain in which SOEs have a leading role and must create an ecosystem and environment for economic sectors to develop, including SOEs. If this can be carried out well, it will help increase the competitiveness of the Vietnamese business sector, from which businesses can access the production chains of transnational enterprises and FDI enterprises.

Second, there must be a mechanism for SOEs to take the lead in innovation, digital transformation, economic use of energy, and green growth.To make SOEs stronger, the salary policy will have to change. Employees receive wages according to productivity, wages increase according to the growth rate of labor productivity and managers benefit according to management efficiency.

The issue of wages has been raised for a long time and this time it continues to be included in the project so that the Ministry of Labor, Invalids and Social Affairs will study and come up with a wage mechanism suitable to the market economy, associated with the efficiency of enterprises.The Ministry of Labor, Invalids and Social Affairs has just piloted the salary mechanism in Vietnam’s Military Industry and Telecoms Group (Viettel) and Vietnam’s state-owned telecoms giant VNPT based on business results and labor productivity. As a result, the staff in these enterprises are very responsible for their work.In his opinion, it is necessary to develop a decree to replace the previous decree in the direction of businesses doing business effectively, business leaders and employees have a decent salary. Enterprises with losses and weaknesses must bear low wages, in accordance with the operating situation of enterprises.

By Ngoc Quang – Sài Gòn Giải Phóng – March 28, 2022