Tangled: An engineer from the state-owned Electricity of Vietnam works on transmission lines.
An economic restructure plan recently approved by the government also covers SOE restructure. But many laws and regulations need to be amended to ensure the restructure can be carried out rapidly, Vu Xuan Thuyen, deputy head of the Ministry of Planning and Investment's Department of Enterprise Development, tells Vietweek.
Vietweek: How do you assess the plan?
Vu Xuan Thuyen: The plan focuses on three main issues: restructuring public investment, banks, and state-owned corporations. This is considered the first comprehensive framework for restructuring state-owned enterprises (SOEs).
Earlier we did not have regulations for a responsibility-bearing mechanism to ensure SOEs' effective restructure. This plan has clearer regulations on the issue. However, it would take the actual implementation of the plan to show whether these regulations are sufficient.
SOE restructure began a long time ago, but implementation has been too slow. Why?
The slow pace of restructure is due to shortcomings in regulations. For example, SOEs are required to pull out of non-core areas, but the withdrawal has to both follow market principles and safeguard the investment. The two requirements contradict each other, so it is hard for SOEs to implement them.
Some SOES do not strictly follow regulations on finance during their restructure process. They delay handing in the money raised by selling stakes to strategic investors to the central enterprise restructure supporting fund. Thus, regulations have not been strict enough to ensure SOE restructure is implemented quickly and follows the road map.
Many other regulations are unreasonable. For example, the value of land on which SOEs are located are not considered when equitizing them, so their valuations are very low, causing losses to the government. Many regulations have been amended during the implementation process.
Who will invest in infrastructure in remote and mountainous areas if SOEs no longer play a decisive role in the economy?
We also take a lot of time to study and get experts' opinions before deciding on regulations for equitization; so implementation is slow.
However, equitization is very important, so we should not implement in a hasty manner. The most important thing is to restructure effectively [can] state-owned corporations, after restructure, compete with international firms? Now there are no Vietnamese firms in the list of 100 leading Asian firms.
To compete well, firms should have strategies to develop their business and improve their competitiveness and technologies. SOEs now have poor technologies, which could block their development. The economic restructure plan considers only major issues. SOEs should draft their own restructure plans.
Is it difficult for SOEs to successfully restructure if they continue to be used as tools for macroeconomic adjustment?
In a country like Vietnam, who will invest in infrastructure in remote and mountainous areas if SOEs no longer play a decisive role in the economy? SOEs should invest in areas that cannot attract private investment because of low profits. SOEs should play the role ensuring macroeconomic stability. They should be restructured for more effective operation. Those operating ineffectively should be eliminated.
SOEs would remain very important to our country for the next 10-20 years at least. Some SOEs have been operating poorly, influencing society's assessment about the state sector's effectiveness. In fact, some SOEs would be operating in important fields even after the restructure. Private firms could also provide public goods and services -- which is now done only by SOEs -- for example urban lighting, sanitation, and drainage. In other countries, private firms even manage prisons.
To restructure, SOEs are required to withdraw from non-core areas. Should this be done even if firms are making profits in these non-core areas?
SOEs have to withdraw non-core investments from the areas of finance, banking, property, and stocks whether they make profits or not. However, some SOEs achieve profits from their non-core investments. They should report specific cases to relevant authorities for consideration.
I know the Vietnam Steel Corporation has invested in a joint-venture property project which brings it big profits. Its South Korea partner will hand over the project to the corporation in the next 14 years as per the cooperation. It should report the case to authorities for consideration.
Do you think divestment from non-core areas can be done successfully?
I think if the authorities are determined it could be done successfully. SOEs should now focus on their main business, and could expand non-core investments once they become stronger and have effective business plans. They should not pour money into non-core fields when they are not strong enough in their main business.
For example, Electricity of Vietnam should not invest in non-core sectors when it cannot supply enough electricity.
To successfully restructure, SOEs should deal strictly with debts. How can they resolve their bad debts problem?
SOEs, when restructuring, have to review their investment and find ways to repay debts. They should discuss with banks to get new loans to repay old ones, or look to raise other funds to do it, even if it means selling stakes. SOEs that cannot raise funds to repay their debts should be asked to announce bankruptcy.
The government is using taxpayers' money to rescue some SOEs that have large debts?
I know some such cases. The government does it in some special cases for the purpose of safeguarding political and social stability and tens of thousands of people's jobs. But this will reduce in the coming time since the government has clearly spelled out the responsibility of company bosses. Heads of SOEs that make losses for two consecutive years will be fired.
RESTRUCTURE PLAN TAKES AIM
AT PUBLIC SECTOR REFORMS
A plan to boost the economy, approved by Prime Minister Nguyen Tan Dung on February 12, focuses on restructuring public investment, banks, and state-owned enterprises while controlling inflation and maintaining growth.
To take effect immediately, it envisages a prudent monetary policy to tame inflation while ensuring "reasonable growth."
It seeks a tight fiscal policy, promotion of exports, and strict control over imports, and to boost domestic production of consumer goods.
Banks will focus on dealing with overall bad debts as well as those of individual lenders, expand their core businesses, improve payment systems, avoid cross-ownership and increase transparency as part of measures to reform the sector by 2015. Bad debt should be cut to below 3 percent by 2015.
Restructure of state-owned enterprises will focus on the defense industry, monopolies, and those providing essential goods and services. More state-owned firms should be equitized, the plan says, without providing details.
It also reiterates a policy of divestment from non-core businesses by state-owned firms and encourages the establishment and development of domestic private companies.
The country will aim to "maximize the scale of and opportunity for private investment, especially the domestic private sector."