Weaknesses hinder SOE restructuring process

Experts have claimed that the attraction of private capital into SOEs still falls short of expectations, whilst the restructuring of SOEs also fails to fulfill the goal of improving their operational efficiency. (Illustrative photo: baodauthau.vn)

The total State capital in enterprises stands at VND1.4 quadrillion (US$60.2 billion), whilst contributions made by State-owned enterprises (SOEs) to the State budget and overall economic growth are on a downward trend.

SOEs still hold key industrial sectors such as power, coal, steel, and cement; but they have only created jobs for 8 per cent of the total labour force.

The country expects to complete the pestment of State capital from firms in which the state doesn’t need to hold capital, improve the performance of businesses, and thoroughly handle poor-performing and loss-making SOEs by the end of 2020.

However, e

xperts have claimed that the attraction of private capital into SOEs still falls short of expectations, whilst the restructuring of SOEs also fails to fulfill the goal of improving their operational efficiency.

“We should review the efficiency of the State economic sector and the restructuring of SOEs as well as their role and contributions to overall socio-economic development, said Nguyen Dinh Cung, head of the CIEM.

Blaming institutional and legal shortcomings for the sluggish SOE restructuring, the CIEM official said the State’s ownership and management of enterprises have yet to be separated, posing practical risks of unequal treatment and unfair competition.

According to economic expert Le Xuan Ba, SOEs are considered the most crucial element of the State economic sector as well as the main force of economic growth. Despite this significance, they have performed poorly. He also noted that this old mindset should not be carried forward into the future.

Analyst Tran Tien Cuong said SOEs should only be used as a support tool alongside policies aimed at regulating the macro-economy, with their role being institutionalized and made transparent.

Cuong called up on the State to increasingly monitor and audit its capital and assets, along with stronger analysis, assessment, discovery, and warning of SOEs’ problems.

Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam (BIDV), said that the pestment of SOEs remains sluggish and has reached just 30 per cent of the total projected SOEs over the past decade. Luc added that concerted efforts should be raised to make in-depth analysis on restructuring formats and standardizing criteria to assess the efficiency of SOE restructuring.

Fitch Solutions, a macro research entity of Fitch Group, said in a recent report that the slow pace of SOE pestment will continue to hinder the country’s fiscal revenue growth. In August 2017, the Government set a target to pest 406 SOEs by 2020, with 135 SOEs set for pestment in 2017, and 181 in 2018. However, only 13 were successfully pested in 2017 with a further 52 in 2018.

According to the Corporate Finance Department (CFD) under the Ministry of Finance, the Government has identified a further 18 SOEs to be pested during 2019 and will continue the pestment of an additional 41 SOEs from the 2018 list.

Fitch Solutions quoted comments made by Dang Quyet Tien, head of the CFD, as saying that some of the key challenges facing the SOE pestment process include poor interest from investors, the SOE's scale of business, and assets which ‘require careful valuation to avoid losses for the State budget’.

Land-related issues remain another hindrance to SOE pestment as some SOEs have yet to complete their land use plans before submitting them to competent agencies.