Efficiency not as high as expected
Pham Duc Trung, Vice Head of the Enterprise Committee under the Central Institute for Economic Management (CIEM), says business efficiency is not low, as shown in statistics related to capital growth, sales revenue, profit, and contribution to the State budget.
However, he says, it is crucial to speed up business restructuring because their operations fail to pay off as expected.
According to the General Statistics Office, State-owned enterprises have a total capitalization of VND3.2 trillion, making up 37 percent of Vietnam’s total capital. The top ten biggest businesses voted by Vietnamreport are all State-owned. 80 percent of the State-owned businesses are considered big and medium in terms of capital and 60 percent of them are big and medium in terms of labour. And the profit-to-sales ratio of State-owned enterprises is 1.35 times higher than that of the entire business network.
Trung argues that it is not easy to assess the efficiency of State-owned enterprises because there are not clear criteria to make a comparison between conducting business operations and implementing social responsibilities like stabilizing prices.
However, the performance of State-owned businesses is not as effective as expected as far as the profitability ratio is concerned.
State-owned businesses hold major resources but they have not invested very effectively. Not to mention some have suffered heavy losses and are running up huge debts.
Generally speaking, the quality of their products and services remains too low, Trung says.
He proposes integrating business restructuring into the overall economic restructuring. In his view, restructuring should be done not only in every business but also in the whole state-run sector to reduce the number of loss-making enterprises.
Before 2003, only businesses with 100 percent of state capital were recognized as State-owned. Now many joint stock companies such as the Joint Stock Commercial Bank for Foreign Trade of Vietnam and the Vietnam Joint Stock Commercial Bank for Industry and Trade are also considered State-owned.
So to speak, restructuring should be focused on businesses with 50 – 100 percent of State capital.
In fact, business restructuring has taken shape since 1991 through reorganization and equitization of State-owned enterprises. However, there remain certain snags in the introduction and implementation of policies.
No more privileged but under tighter control
To achieve the goal of business restructuring, it is necessary to focus on the completion of mechanisms and policies,” Trung quotes Deputy Prime Minister Vu Van Ninh as saying.
He says many ministries still function as the business owner’s representatives, management agencies, and policy makers and this makes them uncomfortable to assume less power over businesses or stop granting them privileges.
CIEM Deputy Director Nguyen Dinh Cung emphasizes the importance of building an institution in which there are same regulations for all kinds of businesses and no privileges for State-owned enterprises.
Market-based principles should also be applied to State-owned enterprises, he says, adding that they should be forced to file for bankruptcy if they suffer losses instead of being rescued by the State.
In addition, management regulations should be brought in line with international practices, he says.
He also proposes providing transparent information to improve the effectiveness of supervision.
Add new comment