State capital committee takes charge of state assets in SOEs

Prime Minister Nguyen Xuan Phuc last week issued Resolution No. 01/NQ-CP on key tasks and solutions to implementing the country’s socio-economic development plan for 2018. The resolution states, “A committee to manage state capital in enterprises will be established this year.”

During a recent teleconference between the government, ministries, and localities, Phuc stressed that this committee, which represents ownership of enterprises’ state capital, will be founded in 2018’s first quarter, in order to more effectively supervise and manage state capital and assets, and to create a more transparent business climate.

The Ministry of Planning and Investment’s drafted plan to establish this committee was submitted to the government a long time ago, following many discussions and conferences.

“It will be a new agency, with personnel to be newly recruited. Some personnel will come from relevant ministries,” Phan Duc Hieu, vice head of the Central Institute for Economic Management, which directly drafted the plan, told VIR. “We hope the new committee will help the government to control state capital in enterprises with greater ease.”

The committee will not manage state-owned enterprises’ (SOEs) performance, instead purely looking at their state capital and assets. All enterprises will continue operating under the law and report their operational results to their relevant sector-specialised bodies such as finance, banking, environment, and industry and trade.

The committee will take over state stakes in 30 economic groups and corporations, whose total capital and assets are valued at about $227.3 billion, equivalent to Vietnam’s GDP in 2017.

Sebastian Eckardt, lead economist for the World Bank in Vietnam, told VIR that the establishment of the committee “is a positive initiative”. He added that it not only reflects good corporate governance practices of the Organisation for Economic Co-operation and Development for SOE management, but also the potential to contribute to the government’s ultimate objective of enhancing performance and productivity in the SOE sector and the economy more broadly.

According to Eckardt, separating ownership and regulatory functions is important for two main reasons. First, it mitigates potential conflicts of interest in sectors where the state operates as an owner and a regulator, and can help level the playing field and enhance competition between enterprises, regardless of their ownership. Second, having a dedicated ownership agency also allows the government to professionalise the management of its assets and ensure value maximisation and performance while reducing potential fiscal risks.

Commenting on the establishment of the government-run committee, Aaron Batten, country economist from Asian Development Bank’s Vietnam resident mission, told VIR that if established, the committee should target a number of key objectives, such as enhancing the accountability of SOEs and developing a clear line of responsibility with the centralised body and SOEs’ objectives, and ensuring SOE reform is subject to clear targets and performance evaluations.

The agency should also be focused on limiting political interference in the management of SOEs, and on professionalising and empowering boards of directors to operate on a commercial basis, added Batten.

“The agency should also promote merit-based appointments within SOEs, including good incentives and environment to recruit and retain full-time, specialised, and skilled individuals,” Batten said. “Furthermore, the agency should oblige SOEs to improve corporate governance arrangements, including providing data and information in a timely manner to the board, the centralised co-ordinating body, and the public.”

Prime Minister Nguyen Xuan Phuc last week issued Resolution No. 01/NQ-CP on key tasks and solutions to implementing the country’s socio-economic development plan for 2018. The resolution states, “A committee to manage state capital in enterprises will be established this year.”

During a recent teleconference between the government, ministries, and localities, Phuc stressed that this committee, which represents ownership of enterprises’ state capital, will be founded in 2018’s first quarter, in order to more effectively supervise and manage state capital and assets, and to create a more transparent business climate.

The Ministry of Planning and Investment’s drafted plan to establish this committee was submitted to the government a long time ago, following many discussions and conferences.

“It will be a new agency, with personnel to be newly recruited. Some personnel will come from relevant ministries,” Phan Duc Hieu, vice head of the Central Institute for Economic Management, which directly drafted the plan, told VIR. “We hope the new committee will help the government to control state capital in enterprises with greater ease.”

The committee will not manage state-owned enterprises’ (SOEs) performance, instead purely looking at their state capital and assets. All enterprises will continue operating under the law and report their operational results to their relevant sector-specialised bodies such as finance, banking, environment, and industry and trade.

The committee will take over state stakes in 30 economic groups and corporations, whose total capital and assets are valued at about $227.3 billion, equivalent to Vietnam’s GDP in 2017.

Sebastian Eckardt, lead economist for the World Bank in Vietnam, told VIR that the establishment of the committee “is a positive initiative”. He added that it not only reflects good corporate governance practices of the Organisation for Economic Co-operation and Development for SOE management, but also the potential to contribute to the government’s ultimate objective of enhancing performance and productivity in the SOE sector and the economy more broadly.

According to Eckardt, separating ownership and regulatory functions is important for two main reasons. First, it mitigates potential conflicts of interest in sectors where the state operates as an owner and a regulator, and can help level the playing field and enhance competition between enterprises, regardless of their ownership. Second, having a dedicated ownership agency also allows the government to professionalise the management of its assets and ensure value maximisation and performance while reducing potential fiscal risks.

Commenting on the establishment of the government-run committee, Aaron Batten, country economist from Asian Development Bank’s Vietnam resident mission, told VIR that if established, the committee should target a number of key objectives, such as enhancing the accountability of SOEs and developing a clear line of responsibility with the centralised body and SOEs’ objectives, and ensuring SOE reform is subject to clear targets and performance evaluations.

The agency should also be focused on limiting political interference in the management of SOEs, and on professionalising and empowering boards of directors to operate on a commercial basis, added Batten.

“The agency should also promote merit-based appointments within SOEs, including good incentives and environment to recruit and retain full-time, specialised, and skilled individuals,” Batten said. “Furthermore, the agency should oblige SOEs to improve corporate governance arrangements, including providing data and information in a timely manner to the board, the centralised co-ordinating body, and the public.”

Prime Minister Nguyen Xuan Phuc last week issued Resolution No. 01/NQ-CP on key tasks and solutions to implementing the country’s socio-economic development plan for 2018. The resolution states, “A committee to manage state capital in enterprises will be established this year.”

During a recent teleconference between the government, ministries, and localities, Phuc stressed that this committee, which represents ownership of enterprises’ state capital, will be founded in 2018’s first quarter, in order to more effectively supervise and manage state capital and assets, and to create a more transparent business climate.

The Ministry of Planning and Investment’s drafted plan to establish this committee was submitted to the government a long time ago, following many discussions and conferences.

“It will be a new agency, with personnel to be newly recruited. Some personnel will come from relevant ministries,” Phan Duc Hieu, vice head of the Central Institute for Economic Management, which directly drafted the plan, told VIR. “We hope the new committee will help the government to control state capital in enterprises with greater ease.”

The committee will not manage state-owned enterprises’ (SOEs) performance, instead purely looking at their state capital and assets. All enterprises will continue operating under the law and report their operational results to their relevant sector-specialised bodies such as finance, banking, environment, and industry and trade.

The committee will take over state stakes in 30 economic groups and corporations, whose total capital and assets are valued at about $227.3 billion, equivalent to Vietnam’s GDP in 2017.

Sebastian Eckardt, lead economist for the World Bank in Vietnam, told VIR that the establishment of the committee “is a positive initiative”. He added that it not only reflects good corporate governance practices of the Organisation for Economic Co-operation and Development for SOE management, but also the potential to contribute to the government’s ultimate objective of enhancing performance and productivity in the SOE sector and the economy more broadly.

According to Eckardt, separating ownership and regulatory functions is important for two main reasons. First, it mitigates potential conflicts of interest in sectors where the state operates as an owner and a regulator, and can help level the playing field and enhance competition between enterprises, regardless of their ownership. Second, having a dedicated ownership agency also allows the government to professionalise the management of its assets and ensure value maximisation and performance while reducing potential fiscal risks.

Commenting on the establishment of the government-run committee, Aaron Batten, country economist from Asian Development Bank’s Vietnam resident mission, told VIR that if established, the committee should target a number of key objectives, such as enhancing the accountability of SOEs and developing a clear line of responsibility with the centralised body and SOEs’ objectives, and ensuring SOE reform is subject to clear targets and performance evaluations.

The agency should also be focused on limiting political interference in the management of SOEs, and on professionalising and empowering boards of directors to operate on a commercial basis, added Batten.

“The agency should also promote merit-based appointments within SOEs, including good incentives and environment to recruit and retain full-time, specialised, and skilled individuals,” Batten said. “Furthermore, the agency should oblige SOEs to improve corporate governance arrangements, including providing data and information in a timely manner to the board, the centralised co-ordinating body, and the public.”