Concerns arise over SOE role in economy
By Tu Giang - The Saigon Times Daily
HANOI – The plan for State-owned enterprise (SOE) restructuring prepared by the Ministry of Finance and passed by the Government on July 17 has overlooked a very important suggestion of the National Assembly (NA) given in the latest sitting.
NA deputies, echoing views of experts in recent seminars and forums, had called for creating a level-playing field for all economic organizations including State-owned groups and relieving them of the burden of macroeconomic stabilization. However, such a role for State groups remains in the restructuring plan.
Must be a macroeconomic tool
The restructuring plan highlights a goal that SOEs must be the core of the State economic sector, enabling the State sector to play the leading role in the economy. In addition, SOEs after being restructured will become an important force helping the State orient, regulate and stabilize the macro-economy.
Dang Quyet Tien, deputy head of the Corporate Finance Department under the Ministry of Finance, the agency in charge of the plan, explained restructuring did not mean to limit or to reduce the role of SOEs but to make them stronger and actually become the pivot of the State economic sector.
Tien told a recent workshop on the restructuring plan: “It is a must to thoroughly grasp the State function to regulate the macro-economy through the use of regulatory tools, in which SOE is an important tool.”
He stated the target of SOE restructuring is to ensure that State groups and corporations will properly fulfill their role as a macroeconomic regulatory tool and as a locomotive for economic development.
He believed this would create a favorable environment and promote the development of other economic sectors.
Different opinion from NA
As such, the SOE restructuring plan passed by the Government on July 17 did not take into account the opinions of the NA Economic Committee given in a written comment on the general plan for economic restructuring on May 18.
A report of the economic committee said: “Regarding the focus on SOE restructuring, most of the economic committee members recommend SOEs should not be used as a tool to regulate and stabilize the macro-economy.”
In addition, the committee proposed separating the task of production-trading for profits and other non-profit social security tasks of SOEs. It is also necessary to minimize the socio-political responsibility of SOEs, which should be assumed by the fiscal and social security policies.
The views of the NA Economic Committee had been reflected in the Spring Economic Forum, gathering many local and foreign experts in Danang this April.
The forum emphasized using SOEs as a tool to regulate and stabilize the macro-economy is groundless theoretically and practically.
The document explained SOEs is a market agent like all other businesses, not a part of the macroeconomic regulatory policies. Moreover, the price to pay for using SOEs as a price stabilization tool is exorbitant.
It is because SOEs are holding monopoly or near-monopoly in many areas, free from the competitive pressure and thus operating less efficiently. As such, they are one of the causes of macroeconomic instability rather than a tool for macroeconomic stabilization.
Using SOEs as a tool to stabilize prices also distorts the market prices of the relevant products, making allocation and use of resources become unreasonable and inefficient.
Furthermore, in several cases, prices, after restrained for a period of time, lead to huge losses or cross subsidies that cannot be restrained anymore but have to break free. This comes as a great shock to the economy, making the macro-economy more unstable and vulnerable.
Nguyen Dinh Cung, vice president of the Central Institute for Economic Management, stressed the Government’s requirements for SOEs “to regulate and stabilize the macro-economic” and “increase the return-on-equity ratios” contradict each other.
“The key target of SOE reform should be efficiency. This sector should compete fairly with other economic sectors,” he said.
According to the SOE restructuring plan of the finance ministry, as of October 2011, there were 1,309 enterprises wholly-owned by the State operating under 11 groups, 11 special corporations and 74 corporations and a number of independent enterprises. In addition, Vietnam has about 1,900 joint stock companies where the State is holding over 50% stakes.
The outstanding loans of 85 out of the 96 State groups and corporations, excluding Vinashin) amounted to more than VND1,044.2 trillion by end-2010, equal to 1.65 times of the total equity.
Moreover, the plan revealed credit debts of 12 State economic groups stood at VND218.7 trillion, equivalent to 8.76% of the total outstanding loans of the banking system, or some 52.66% of the total credits of SOEs as of September 2011.