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State capital use in SOEs not efficient: Minister

State capital use in SOEs not efficient: Minister

Monday, November 26, 2012, 13:00 GMT+7

The use of state capital at state-owned enterprises (SOEs) has not been as efficient as expected, said Bui Quang Vinh, Minister of Planning and Investment in a recent TV program.

The statement was made in answer to the question of which word could be used to precisely describe efficiency in the use of state capital at SOEs: high, medium, low or inefficient, according to the “The people ask - Ministers reply” TV program of the national broadcaster Vietnam Television.

“It is hard to describe the situation in one word, but as I have to choose, I pick the last one but amend it into ‘not as efficient as expected’,’’ Vinh said.

The reason for the choice is that according to the latest government report submitted to the National Assembly in the recent 4th session, there are many state-owned economic groups and corporations bearing high debt-to-equity ratios, meaning they are operating in an ineffective way, he said.

“But on the other side of the coin, we also have many big SOEs working very efficiently, such as the military-run Viettel. But as most state-owned enterprises are inefficiently using state capital, they should be assessed as not as effective as expected,” he added.

Regarding the specific responsibility of any related individuals or groups of state officials causing a series of wrongdoings found at big SOEs, such as Vinashin and Vinalines, after many ministries have stepped in to clear the mess, Vinh said loose management mechanisms are the main cause behind the incidents.

“Since 2005 we have over-emphasized the autonomy of each SOE, while we do not have enough legal provisions and necessary supervisory mechanisms to manage them,” Vinh said.

“Recently, after much editing and consulting, we have finished the Decree No.99 on the assignment of decentralization and implementation of the rights, responsibilities and obligations of owners of SOEs and the management of state capital there.”

“The law, which resulted from numerous amendments, will come into force on December 30.”

“In the new decree, it is very clear that the ministry directly managing specific industries will be the immediate supervisor and is responsible for performance, efficiency in usage of state capital, and the observance of the law in those SOEs.”

“As a result, they have a lot of responsibility and power in many key issues, such as the appointment of the board of directors, general directors, and reviewing annual operational plans.”

Regarding the possibility of whether the new decree will oversee and restrict the act of deliberate wrongdoings, which is quite common in past cases, Vinh said the decree, after learning from past lessons, will offer multiple solutions to prevent such incidents right from the review process for appointment.

In capital management issues, in addition to the branch manager assigned to monitor each investment project, there are also managers at the ministry level who will do the same job on a larger scale to supervise how state capital is invested by launching annual audits and reviews.

When asked if he is satisfied with the decree, Vinh said that as the Ministry of Planning and Investment is the agency drafting it, it is a hard job.

“We have to choose the best solutions as it is not easy to exercise the right to use state equity in SOEs.”

“The decree has been submitted 8 times to the government and 3 times to the Ministry of Justice for approval since 2010. But it has been returned for more research into feasibility after receiving a lot of opposing opinions from those state agencies.”

“The release of Decree 99 will immediately strengthen management in the short term, and while it is still in use, we must continue to study the new model, including the establishment of a state-level committee or a ministry for it.”

Thoai Tran

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