Several weeks ago, a businessman, through acquaintances, met independent economic expert Pham Chi Lan to ask for her comments on the draft Auction Law. Lan refused and recommended that he talk to her husband - independent economist Nguyen Gia Hao, a former advisor of the late Prime Minister Vo Van Kiet. Unlike Lan, who specializes in macroeconomics, Hao specializes in consultation to businesses.

Hao spent four days to study the draft Auction Law, which consists of 81 articles. 

A step forward to a market economy

Hao insisted that with the Auction Law, Vietnam has made the next step into the market economy, in terms of the law, under which the state is only responsible for management, not doing business.

The previous step was the equitization of SOEs, through the Securities Law, and the upcoming step, the Auction Law, is to sell state assets.

Yet he is still worried about the question: will the state lose capital again, when state assets are auctioned?

Article 5 of the draft Auction Law, which was recently submitted to the National Assembly, outlines four principles of asset auction. Hao said that Article 5 misses a vital principle in the sale of state assets: reducing to a minimum loss of state assets. The experience of Russia under the time of President Boris Yeltsin was a clear demonstration of the loss of state assets during privatization in the 1990s.

Many people still remember that in the mid-1990s, an American professor was invited to Vietnam by Prime Minister Vo Van Kiet – Prof. Jeffrey Sachs of Columbia University (USA), who was a special adviser to UN Secretary-General Kofi Annan and Ban Ki-moon. At that time, Professor Sachs had just helped Poland shift to a market economy, and published the book "Poland's jump into the market economy."

Prof. Sachs advised Prime Minister Vo Van Kiet that Vietnam should not follow Russia's experience in equitization of SOEs (Professor Sachs was invited to Russia as an advisor to Prime Minister Chubais to implement SOE equitization, but he did not find common ground with Chubais, so he went to Poland), and he spoke very carefully about Poland’s case.

According to Professor Sachs, Poland succeeded in transforming the economy from a centrally planned to a market economy thanks to 5 pillars. They are: macroeconomic management stability; trade liberalization; privatization; establishment of social welfare network; and capital mobilization.

And, instead of giving advice on how Vietnam should move to the market economy, Prof. Sachs gave Prime Minister Vo Van Kiet his book.

As for Russia, in 20 years of privatization, it wiped out the achievements of 70 years of building socialism in the Soviet Union. An expert from Fulbright University in HCM City cited data that the rate of capital raised during Russia's privatization was equivalent to only 6% of the real value of state assets accumulated in 70 years of building socialism.

The number of rich Russian people also skyrocketed, thanks to the process of selling public assets. According to Forbes, in 2004, ie 10 years after the privatization process began, Russia had up to 36 billionaires (in USD).

In Vietnam, the number of rich people is growing fast. According to the Wealth Report in 2016 by Knight Frank, in 2014 – 2015, the number of people with assets worth over $30 million increased by 8%, to 168 people (the growth rate is 354% from 2005 to 2014, from 37 to 156 people). Meanwhile, in this period (2014-2015) the world's richest people according to the same criteria decreased by 3%, from 193,115 to 184,468 people.

Gia Hao said that if Vietnam does not set the principle of "reducing to a minimum loss of public assets,” then public assets will lose the most. The sale of public assets in Russia is a good lesson for Vietnam. The law must prevent interest groups from using "magic rod" to turn state property into opportunities to enrich some individuals.

Recommendations

Gia Hao made more than 90 comments on specific provisions in the draft Auction Law, with the following key points:

Firstly, it is necessary to structure articles logically. For example, the Rights and Obligations of the auctioneer, the auction company, the auction center, the auction council should be grouped in the same chapter.

Secondly, the explanation of terms is not enough; for example, the draft lacks the definition of the auction center, the auction council. Regarding the form of auction, the draft does not mention "abridged auction", "online auction" ...

Thirdly, try to avoid references to other laws, without clearly naming them, as in the current draft.

Fourthly, try to avoid "post judgment", "retroactivity".

Fifthly, try to avoid the situation "to be the judge in one’s own case". The role of auditors in the valuation of public assets must be mentioned.

Sixthly, "conflicts of interest" (members of the Centre, the Council ...) must be avoided.

Finally, the law should clearly state the legal prescription (provisions for dispute resolution, validity ...)

But when reading the draft Auction Law, Gia Hao found that the law compilers tried to make very specific rules. He understood that, if the National Assembly accepts his recommendations, the Government will not need to issue a decree guiding implementation of the law.

Huynh Phan