Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM) urged accelerating state owned enterprise (SOE) restructuring and equitisation soon, calling it one of the three pillars of national economic restructuring, at a conference held on Wednesday in Ha Noi.
Cung emphasised that the key to effective restructuring of SOEs is better asset productivity management, claiming that a one percentage point improvement in asset management would generate about US$3-4 billion in return, and could push the growth rate of all SOEs up to 7 to 8 per cent per annum.
“Asset and capital management within state enterprises has long been vague, rarely disclosed to the public. This is yet another low point of business management and shows an obvious lack of inspection in order to predict risks and weaknesses. Ultimately, this leads to loss and bankruptcy, all at too late a time to be salvaged,” said Cung.
Most importantly, no ministry, department or authority can be held responsible for these deficiencies, as there is no clear business model which defines the responsibilities of each department.
According to CIEM, from 2011 to 2015, only eight SOEs announced bankruptcy after a long period of loss and only one more went bankrupt from 2016 until now. The institute considers this number miniscule compared to the reality of the economy.
Another matter discussed at the conference was transferring SOEs to the State Capital Investment Corporation (SCIC). So far, this has proved an effective and promising model, though the implementation of the process is in need of much improvement, due to the large number of documents issued by administrative authorities to stop businesses being transferred to the SCIC.
CIEM reported that in 2015, of the 128 businesses’ initial public offerings, only 36 per cent of total shares were sold, while the state still held 81 per cent of total charter capital in these businesses. The first five months of 2017 only saw another 15 SOEs equitised.
Experts at the conference also agreed that the burden of national debts, accumulated through state firms’ outstanding loans, would continue to slow growth, necessitating the urgent restructuring of SOEs.
The conference concluded that to improve state owned businesses equitisation and restructuring, comprehensive and strict legal regulations must be applied. — VNS