SOEs need to innovate as Vietnam aims to have at least 25 with market cap from 1 billion USD

Workers of State-owned VNPT installed 5G station. Vietnam set the target to have at least 25 SOEs with the market capitalisation or equity of 1 billion USD or more by 2025. (Photo: VNPT)

Hanoi (VNS/VNA) - It is critical for State-owned enterprises (SOEs) to strengthen innovations as Vietnam has set the target of having at least 25 SOEs with a market capitalisation of 1 billion USD and more.

According to Minister of Finance Ho Duc Phoc, SOEs are slow to innovate, and this means they fail to keep up with the rapidly changing requirements of the market-based economy.  

He pointed out that the inadequate policies for managing SOEs remain a major cause of their slow innovation and confusion in developing investment strategies and plans.

In addition, the policies on salary and remuneration are not attractive for SOEs to attract high-quality human resources.

The legal framework for management and usage of State capitals at SOEs should be reviewed and improved in line with the amendments to the Law on Bidding and the Law on Land to ensure efficiency, he said.

The recent Government report submitted to the National Assembly revealed that the operation efficiency of SOEs was below expectation while the investment efficiency of SOEs was not as high as expected when the projects were approved.

Some projects with huge investments failed or incurred losses for many years while the restructuring plans did not work.

The report showed that State-owned enterprises saw the total revenue in 2021 drop by 12% against 2020. Pre-tax profit also fell by 20%. Many SOEs earned low ratio of pre-tax profit to equity, around 1-5% which was below the average banking deposit interest rate.

Eighty-four out of 401 SOEs reported accumulated losses for many years.

SOEs failed to play their role in driving the development of other sectors and promoting value chain linkage, the report wrote.

In addition, SOEs were weak in industries that affected the improvement of the economy’s competitiveness such as high technology, precision mechanics, component manufacturing and source technology.

Most SOEs in key and spearhead industries operated in a close-ended manner which did not create conditions for other enterprises to participate in their value chains.

According to Minister of Planning and Investment Nguyen Chi Dung, SOEs needed to focus on research and development, innovation, digital transformation, infrastructure development and finance to create growth drivers.

It is necessary to improve policies and mechanisms for the management of SOEs to enable them to operate under the market-based mechanism, Dung said.

As of the end of last year, there were 826 SOEs, 476 of which were wholly State-owned. The total State capital at SOEs was more than 1.6 quadrillion VND, up by 3% against 2020./.