At a recent conference on Vietnam’s SOEs, Minister of Planning and Investment Nguyen Chi Dung analyzed what SOEs have performed in recent years.

Firstly, SOEs hold large resources of capital, assets, technology, and high-quality human resources. They earn big revenue and contribute significantly to state budget revenue. The 100% state-owned enterprises hold about 7% of total assets and 10% of equity of all enterprises in the market. 

Total assets of the SOEs by book value in 2021 reached about VND 4 quadrillion. The average asset of a SOE in 2021 was about VND4,100 billion, 10 times higher than that of foreign-invested enterprises and 109 times higher than that of domestic private enterprises.

The average pre-tax profit-to-equity ratio of SOEs for the 2016 - 2020 period was 10.46%, higher than the bank interest rate in this period; the average pre-tax profit to total assets ratio was 4.87%, 1.26% higher than that of domestic private enterprises. SOEs contributed 28% of the total tax and other payables to the state budget. 

In terms of labor efficiency, the SOE sector reached 18.9 times; followed by the domestic private sector with 17 times and the FDI sector with 13 times.

Secondly, SOEs have played a dominant role in a number of important industries such as oil and gas, electricity, finance, banking, telecommunications, transport infrastructure and production of some basic input materials for the economy.

Currently, up to 96% of customers use mobile phone networks of Viettel, VNPT and Mobifone. State-owned commercial banks such as BIDV, Vietcombank, Vietinbank... accounted for more than 50% of the total loan balance of the whole banking sector.

Third, SOEs have played a major role in the production and supply of public products and services. Minister Dung added that many State-owned corporations have joined the State in ensuring national defense and security, implementing social security policies, and combining economic development with ensuring national defense, security and sovereignty. 

Fourthly, SOEs make an important contribution in building and developing the necessary infrastructure system for socio-economic development. Investment capital of the SOE sector has contributed significantly to the total investment capital of the State in socio-economic development, accounting for 24.6% of the State’s total investment capital and 12% of the total society investment capital in the period 2016-2020.

SOEs play a very important role and position in the Vietnamese economy. Their activities have a great influence on the development of a number of industries and fields. Investment activities of SOEs in key and important sectors of the economy have helped reduce the burden for the state budget in the implementation of important infrastructure investment projects, contributing to restructuring the economy in association with renovating the growth model.

Unable to perform the leading role

However, the activities and contributions of the SOE sector to the economy in recent years have not been commensurate with their potential, especially the resources they hold and their market dominance. Minister Dung pointed out some limitations.

State-owned corporations have basically failed to fulfill their role of leading and motivating the economy. The performance of SOEs is not commensurate with the resources they held.

SOEs currently have the highest debt ratio compared to other types of businesses in Vietnam. They operate effectively in very few industries, in which they hold advantages such as mineral exploitation, oil and gas, telecommunications, or finance - banking.

The competitiveness, application of science and technology and innovation of large-scale SOEs are still limited, failing to meet the requirements of being the core force of the economy. Corporate governance innovation has been implemented slowly, not really approaching good international principles and practices, or in line with the modern market economy.

The basic treatment and compensation regime still applies to public servants and public employees, failing to create motivation to encourage employees, especially managers, to be proactive, innovative and creative and to devote themselves to the management and administration of enterprises.

The implementation of new investment projects of SOEs has not been promoted in recent times. In the period 2016-2020, there were very few new large-scale projects of SOEs to be kicked off.

Particularly, for 19 groups and corporations under the State Capital Management Committee and Viettel Group, which holds nearly 90% of the resources of the SOE sector, only 3 A-level projects have been implemented. 

This fact will lead to a result in the next five years that the contribution of the SOE sector to the economy will be very limited when the current contribution of SOEs to Vietnam’s GDP is about 29%.

In addition, the comprehensive restructuring of SOEs is still a formality, mainly focusing on arrangement, equitization and divestment to have a more reasonable structure, not focusing on implementing breakthrough orientations and solutions in science and technology, innovation, and high-quality human resources. In particular, Dung said that SOEs still lack a strategic vision in development, especially participating in global value chains and reaching out to the world.

5 reasons for problems of Vietnam’s SOEs

The legal system for SOEs still has many shortcomings. Many state-owned corporations have to consult with and seek approval from many management agencies.

Efforts to strengthen the position and role of SOEs has not been given due attention.

It has mainly focused on directing the implementation of solutions to handle previous problems and backlogs for some SOEs and inefficient investment projects to limit losses while lacking efforts to change institutions, mechanisms and policies to remove administrative barriers.

The regulations on salary and other salary and bonus regimes for SOE managers and laborers are not suitable with the actual situation.

The state management of SOEs is still unclear. No specific state management agency is assigned to monitor and review activities of SOEs.
 
Lan Anh