Workers make apparel at the Chien Thang Garment Joint Stock Company in Hanoi (Photo: VNA) Vietnam has improved the legal framework toensure the rights of autonomy and self-responsibility of SOEs closely followinginternational practices, but the legal framework is still missing manycomponents, according to a recent report on the autonomy andself-responsibility under the market mechanism of SOEs conducted byCIEM with support from the Australia-Vietnam Economic Reform(Aus4reform) Programme.
The State still intervenes deeplyin the operation of wholly State-owned enterprises, leading tooverworked agencies that manage State capital at enterprises, whilethe enterprises face many difficulties.
To enhance the autonomy andself-responsibility of State-owned enterprises, the CIEM research team saidimproving transparency is key.
SOEs should publish public reports on bothfinancial and non-financial information according to international standards.Strengthening financial discipline for State-owned enterprises is anotherimportant recommendation.
In addition, the transformation of an SOEinto a joint-stock company is the most important measure to improve enterpriseautonomy.
Phan Duc Hieu, CIEM deputy director, said the"fair treatment" of State enterprises is a requirement in a marketeconomy, along with the implementation of commitments on international economicintegration.
During 35 years of reform, Vietnamese lawshave been amended so that State enterprises are increasingly empoweredwith more autonomy and responsibility.
According to Pham Duc Trung, Head of theCIEM's Department of Enterprise Reform and Development Research, the EnterpriseLaw stipulates that a State-owned enterprise has the same rights andobligations as an enterprise of all economic sectors, including businessautonomy, contract, and possession, use and disposition of property.
However, institutions and managementmechanisms have failed to create full autonomy and self-responsibility forState enterprises. State management agencies decide many issues in thecorporate administration of SOEs. That can weaken the motivation ofenterprises' leaders to act in the best interests ofthe enterprise and its shareholders.
Besides that, many SOEs have fallen intodissolution or bankruptcy, but are still kept alive via State support.
Le Duy Binh, CEO of Economica Vietnam, saidSOEs wanted to be like private enterprises with full autonomy, but theoperation of SOEs was often dependent on the State management agency thatrepresents the owner.
Le Tien Truong, Chairman of the Vietnam NationalTextile and Garment Group (Vinatex), said SOEs must comply with the Law onmanagement and use of State capital to invest in production and business.
Before approving decisions within theauthority of a board of directors, the representative of State capital in theenterprise must consult the State agency that manages State capital at SOEs,then convene a meeting of the board of directors to approve those decisions forthem to be executed. It can take one or two months for the State agency torespond.
When Vinatex was a wholly State-ownedenterprise, it had to wait for a governing body to give it directions. Thesituation has continued even though Vinatex became a joint-stock company with48 per cent of the charter capital belonging to non-State shareholders in 2015,so this process will make it difficult for the group (Vinatex), according toTruong.
"For a private company, a shareholderonly votes on the company's strategic issues. Meanwhile, at an SOE, theshareholder must also vote on other normal issues. Thus, it has broken corporategovernance practices," Binh said.
Nguyen Dinh Cung, former CIEM director, wasquoted by the Vietnam News Agency as saying: “The State needs to create abusiness environment to promote and ensure State-owned enterprises operate andcompete fairly according to market principles."
He said legal provisions should be revised toensure full autonomy for State enterprises in investment and business.
In addition, there should be a legal systemto improve business autonomy by fundamentally revising the Law on Managementand Use of State capital to invest in production and business in enterprises.
Along with that, State agencies should nothave the right to give decisions, but only give opinions and approve investmentpolicies. In other words, the State should not decide on issues of corporategovernance.
Experts have also recommended that, accordingto international practice on SOE governance, especially the OECD's guidance, toensure the autonomy and self-responsibility of SOEs under market principles,the State - as the owner - needs to clearly define the reason or goal ofmaintaining ownership in the enterprise. The State should create conditions forthe management board at the enterprises to operate autonomously and responsibly.
That means the thinking about SOEs and Statemanagement for these enterprises must change fundamentally. When operatingunder market principles, SOEs will play the right role in the economic recoveryand growth, according to experts./.
VNA
