Nguyen Dinh Cung, acting director of the Central Institute for EconomicManagement, spoke with Nguoi lao dong (The Labourer) newspaper about theplan to restructure the State sector.
* In your opinion, what have been the programme's major achievements in the past two years?
A key objective of the programme is to switch the basis of theeconomic growth model from relying on natural resources investment toother areas offering a high level of productivity and comparativeadvantage.
Looking back at the programme, I'm sorryto say not much has changed. The current shifts are not strong enoughto fundamentally change the mechanisms governing public investment andthe management of state own enterprises.
We don'thave an economic recovery driven by increases in public investment, orin the selling of more government bonds. We have not seen the light atthe end of the tunnel.
* Can you explain why progress has been slow?
By now proposals to restructure 68 State entities have been approvedand 101 proposals on sectoral reform accepted. How to implement theseproposals remains a complex issue.
One pertinentexample of this is divestment in non-core businesses by State-runcorporations. Under the Government's programme, the winding down ofnon-core business must be completed by 2015.
However, there is still a lot of confusion about this notion of"non-core businesses". In reality, the winding down of non-core businessinvestment means re-allocating resources to compete more effectivelyand efficiently in a market-based economy.
Its keypurpose is to use State resources to invest in areas that will yieldsocial and economic returns on investment. However, in reality,re-allocating capital only occurs when businesses are unprofitable.
In some cases, owners of unprofitable companies have also tried tosell their shares in failing companies for a very high price, stiflingprogress in this area.
* What measures should be taken to solve this trend?
It is imperative to change our thinking and the legal framework tobring the actions of State corporations, in regards to non-corebusinesses, in line with the Government's roadmap.
The Government needs to provide specific instructions on how toincorporate the real cost of capital into assessments of seed capital sothat we can forecast a return on investment.
Additionally, the Government needs to come up with a mechanism to assessthe re-allocation of investment from non-core businesses.
* If SOEs are still regarded as important levers in the market economy, what are the limitations of these actions?
It should not be the onus of the Government to impose market rules onthe State-run sector. These initiatives need to be self-driven andadopted by SOEs themselves if they truly wish to compete effectively inthe market place and not rely on public funding.
Inrecent years, the Government began to apply market rules on Statecorporations, however they have not been adhered to. More importantly,public investment in SOEs removes the imperative to become moreefficient.
Whenever they have faced difficulties,the State has extended its hand to rescue them through tax reductions,exemption and extensions on debt repayments.
Thisspecial treatment has hampered the restructuring process at theState-run sector level and the macroeconomic level. SOEs need to standon their own feet and take responsibility for their businesses.
The Government cannot protect them forever. That's the rule of a true market economy!.-VNA
* In your opinion, what have been the programme's major achievements in the past two years?
A key objective of the programme is to switch the basis of theeconomic growth model from relying on natural resources investment toother areas offering a high level of productivity and comparativeadvantage.
Looking back at the programme, I'm sorryto say not much has changed. The current shifts are not strong enoughto fundamentally change the mechanisms governing public investment andthe management of state own enterprises.
We don'thave an economic recovery driven by increases in public investment, orin the selling of more government bonds. We have not seen the light atthe end of the tunnel.
* Can you explain why progress has been slow?
By now proposals to restructure 68 State entities have been approvedand 101 proposals on sectoral reform accepted. How to implement theseproposals remains a complex issue.
One pertinentexample of this is divestment in non-core businesses by State-runcorporations. Under the Government's programme, the winding down ofnon-core business must be completed by 2015.
However, there is still a lot of confusion about this notion of"non-core businesses". In reality, the winding down of non-core businessinvestment means re-allocating resources to compete more effectivelyand efficiently in a market-based economy.
Its keypurpose is to use State resources to invest in areas that will yieldsocial and economic returns on investment. However, in reality,re-allocating capital only occurs when businesses are unprofitable.
In some cases, owners of unprofitable companies have also tried tosell their shares in failing companies for a very high price, stiflingprogress in this area.
* What measures should be taken to solve this trend?
It is imperative to change our thinking and the legal framework tobring the actions of State corporations, in regards to non-corebusinesses, in line with the Government's roadmap.
The Government needs to provide specific instructions on how toincorporate the real cost of capital into assessments of seed capital sothat we can forecast a return on investment.
Additionally, the Government needs to come up with a mechanism to assessthe re-allocation of investment from non-core businesses.
* If SOEs are still regarded as important levers in the market economy, what are the limitations of these actions?
It should not be the onus of the Government to impose market rules onthe State-run sector. These initiatives need to be self-driven andadopted by SOEs themselves if they truly wish to compete effectively inthe market place and not rely on public funding.
Inrecent years, the Government began to apply market rules on Statecorporations, however they have not been adhered to. More importantly,public investment in SOEs removes the imperative to become moreefficient.
Whenever they have faced difficulties,the State has extended its hand to rescue them through tax reductions,exemption and extensions on debt repayments.
Thisspecial treatment has hampered the restructuring process at theState-run sector level and the macroeconomic level. SOEs need to standon their own feet and take responsibility for their businesses.
The Government cannot protect them forever. That's the rule of a true market economy!.-VNA
