Vietnam’s Ministry of Planning and Investment has announced a long-awaited scheme to form a national committee to supervise and manage state capital and assets at enterprises, mostly state-controlled ones, in a move to improve corporate governance and boost economic growth.
Better Corporate Governance Aimed
The committee, to be set up by the government, will be in charge of managing the state-owned asset and capital portfolios at companies.
It will advise the government on policies of state ownership, reforming state-owned enterprises and investing state capital in the economy.
The committee is a follow-up of a resolution adopted in January by the Communist Party of Vietnam, requiring the separation of functions of ownership and management of state-owned assets, and the elimination of ownership representation of ministries and local governments at state-invested companies.
The committee is part of Vietnam’s roadmap that aims to reach the market economy status, improve the efficiency of state capital and corporate governance amid accelerated global integration, according to a statement filed on the website of the Ministry of Planning and Investment.
Vietnam is a party to the 12-nation Trans-Pacific Partnership (TPP) accord which regulates the relaxation of the role each state plays in government-run enterprises.
Committee to Oversee $240 Billion in Assets
According to the draft plan, the committee will take over state stakes in 30 conglomerates and corporations, including State Capital Investment Corporation (SCIC) which has similar functions as the proposed committee.
The nine conglomerates include Vinatex
, Electricity of Vietnam, Vinachem
, Vinacomin, VNPT, Vietnam Rubber Group, Petrolimex and Baoviet Holdings.
Of the 30 groups and corporations, up to 12 are currently run by the Ministry of Industry and Trade, five by the Ministry of Transport, five by the Ministry of Agriculture and Rural Development, three by the Ministry of Construction, two by the Ministry of Finance, two by the Ministry of Information and Communications and one by the Ministry of Health.
According to a report by the Ministry of Finance in 2015, 781 wholly state-owned enterprises (SOEs) had 3,105 trillion dong ($138 billion) in assets and 1,233 trillion dong ($54.8 billion) in equity.
Meanwhile, data released by the General Statistics Office in 2014 showed that combined assets of companies with over 50% stakes held by the government amounted to 5,408 trillion dong ($240 billion).
Pros and Cons
Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM). Photo: Internet.
Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM), was quoted by the local Customs newspaper as saying that the state-run sector has a large number of shortcomings with respect to management of state capital. However, it has great growth potential if corporate governance is bettered.
“The establishment of a ministerial agency in charge of running such huge assets will help increase the efficiency of state capital. This room should be taken advantage of to boost economic growth in the 2016-2020 period,” Cung said.
Such a committee will also help avoid interest conflicts in functions by separating state ownership from the functions of policymaking and market regulation.
The free trade agreements that Vietnam has signed all require transparency, integrity and neutrality from SOEs. “Establishing a specialized agency that executes the state ownership function is a must in the integration process,” Cung noted.
He warned that the overhaul will lead to change in power and interests of many government agencies, thus it will encounter hindrances and resistance.
Pham Duc Trung, deputy head of Business Reform Research Department under CIEM, raised questions about the centralization of state assets on a single agency, the swelling of state apparatus, and the validity of such a committee when the equitization process of SOEs gains momentum.
A representative from the Ministry of Industry and Trade, which now has many groups at its helms, said a legal basis and the timing of setting up the committee must be considered thoroughly.