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Should SOEs make outward investments?

Experts warn that if state-owned enterprises (SOEs) make outward investments, the state would lose capital.

Reports all show state-owned economic groups and general corporations have bad business performance and many of them have fallen into deadlock.



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The low capability of SOEs is blamed on the lack of a mechanism that promotes competition.

In order to encourage competition, an economist, at a recent workshop on SOE reform, suggested a policy which forces SOEs to make outward investments.

When doing this, SOEs will have to compete with rivals in the international market. If enterprises can export their products to choosy markets, this means that they have high competitive capability.

When doing this, SOEs will have to compete with rivals in the international market. If enterprises can export their products to choosy markets, this means that they have high competitive capability.

The economist cited China as an example. The country has succeeded in forcing big corporations to accelerate investments outwards, while Vietnam still has not done this.

Others are cautious about the idea.

Bui Ngoc Son from the Institute for the World Economic and Politic Studies warned that SOEs’ investments overseas will only lead to the loss of state money. In reality SOEs cannot do business effectively, no matter where they are.

Regarding China, Son said there is no official report about China’s policy on forcing big corporations to make outward investment.

He noted that Chinese SOEs mostly make outward investment under the Belt and Road strategy and the way they invest is not like normal enterprises. They, for instance, use Chinese workers abroad, and don’t hire local workers in targeted countries.

“The strategy on outward investment encouragement has just kicked off and it’s still too early to say about their success,” Son said. The expert went on to point out that Chinese SOEs can make a profit because they exploit the state’s power.

An analyst disagreed with the plan to force Vietnam’s large corporations make outward investments, saying that the investments made by some powerful corporations so far have brought unsatisfactory benefits.

The report of the National Assembly’s Supervision Taskforce on the observation of the state’s asset management in SOEs in 2011-2016 also shows inefficiency of outward investment activities.

By the end of 2016, SOEs had made $7 billion worth of outward investment, but only 4 out of 18 investors earned money from projects overseas, and money recovered was $1.5 billion, or just 22 percent of the investment capital.

Up to 25.5 percent of projects reported losses for 2016, and 29 percent of projects reported accumulative loss by the end of 2016.

Nearly half of the projects did not have a report about revenue and profit.

Mai Lan


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