The number of wholly state-owned enterprises (SOEs) in Vietnam is projected to be reduced by five times from 500 currently to 100 by 2020, according to Vice Minister of Planning and Investment Nguyen Van Hieu. 

Since 2016, the government has approved the equitization scheme of 136 SOEs, including large corporations such as Vietnam Rubber Group, Binh Son Refinery and Petrochemical, PetroVietnam Oil, PetroVietnam Power, attracting large interest from local and foreign investors, stated Hieu at a conference last week. 

However, the reform progress of the state sector remains sluggish, added Hieu, particularly due to  institutional bottlenecks. 

Dang Quyet Tien, director of the Corporate Finance Department under the Ministry of Finance (MoF), informed that the divestment process resulted in proceeds of VND154.30 trillion (US$6.66 billion) from divesting VND16.46 trillion (US$710.88 million) in book value from 2016 to September 2018. 

In the January – September period, the government raised VND9.14 trillion (US$394.87 million) from divesting VND3.77 trillion (US$162.88 million) in book value, Tien added. 

SOE performance below expectation

With regard to the efficiency of state firms, Vice Minister Hieu admitted that the business result of SOEs are not proportional to the huge state capital under their disposal, while corporate governance in most SOEs has not been up to international standards and lacks of transparency. 

In the coming time, the equitization and divestment processes are considered essential in the government’s effort of restructuring the public sector, Hieu stressed. 

According to Hieu, the establishment of the Commission for the Management of State Capital (CMSC), dubbed as the super commission, would be key to enhance efficiency in SOEs’ operation.

The CMSC’s main task is to supervise the use of state capital at 19 leading state-run groups and corporations, which manage a combined capital of VND1,000 trillion (US$43.02 billion) and assets of over VND2,300 trillion (US$99 billion).

Pham Duc Trung, head of Corporate Development and Reform Department of the Central Institute for Economic Management (CIEM), stated the SOEs should apply the international corporate governance practice for greater transparency, while the management of state capital should be one of key performance indicators of SOEs. 

In the 2020 – 2025 period, SOEs should target return on equity (ROE) of at least 15% per year, and return on asset (ROA) of 7 – 9% per year, Trung stated. 

In a conferenced held by CIEM in July, economist Pham Chi Lan stressed state representatives and related ministries should bear the responsibility for the lack of information from SOEs, while there are no regulations to ensure the agency that represents the ownership is held accountable for improving SOE performance. 

Senior economist Tran Dinh Thien stated there should be a clear protocol to deal with SOEs not disclosing information in accordance to the law, as "data management and transparency are critical to improve SOE governance."

Consequently, the state capital representative must enforce requirements that SOEs publish annual and financial reports with detailed information, including audit statements from independent auditors, Thien added.

Hanoitimes