Vietnam should accelerate its reform of state-owned enterprises (SOEs) to increase attraction of foreign investment, improve the strength of the national economy, and bring prosperity to people, former British Prime Minister Tony Blair has recommended. The former UK premier offered the recommendations while attending a seminar on the role of SOEs held by the Vietnamese Ministry of Planning and Investment in Hanoi on Wednesday. At the function, Blair and his office in Vietnam put forward many suggestions based on their studies in reforming SOEs in six countries, including the UK itself, Japan, Brazil, Mexico, Hungary, and Poland. Blair stressed that SOE reform is part of a change that needs to be created for Vietnam’s economy so that the county can lure more investment from foreign partners, boost economic growth, and bring in prosperity. The era in which governments hold the right to govern the operations of businesses prevailed only in the 1940-1950 period, and over time, people have realized that such a management model is ineffective, the ex-chief of the UK government said. Governments are not very effective in operating economic and trading entities, and particularly, governments are not good at making innovation and creating initiatives in business activities, while business administration always requires renovation and creativity, he said. SOE reforms have taken place around the world for the past 20-30 years and they all faced certain difficulties, including objections from people who did not like such reforms, as they thought that their jobs would be more secure if their companies continued to be an SOE, Blair said. However, such SOE reforms have gradually created benefits that overwhelmed objections, he said. Reform programs in Western countries have also faced many objections, Blair said, adding that such opposition is normal and those reforms that face no protest should be reviewed. Sharing his experience of 10 years working as the UK’s prime minister, Blair said that renovation is needed for any country to gain progress and growth.
In a report on SOE reform carried out in the six countries, Fale Maly, from the Tony Blair Office in Hanoi, said that these countries began to privatize many of their SOEs in the 1980s after realizing that such SOEs had operated less effectively than expected. The experience of privatization in these countries showed that their governments have shifted from their roles of being the owners of enterprises to their new roles of regulating them, and at the same time created new instruments to have positive effects on their economies, according to the report. Vietnam should clearly determine whether its equitization process is being carried out as a plan to transform its economy into a market economy and to reduce the government debt or due to international pressures, such as its commitments to the World Trade Organization or free trade agreements, the report said. The report added that the Vietnamese government, which is holding ownership in 40 fields, should adopt a clearer point of view on narrowing state ownership of businesses. The term “equitization” used by Vietnam is different from “privatization” adopted by many other countries, as the Vietnamese government is still holding large stakes in many businesses, the report said. Currently, in a number of cases of equitization of SOEs in Vietnam, equitization has been carried out mainly as a way to mobilize capital, not to reduce state ownership of those businesses’ capital or encourage the development of the private sector. Therefore, Vietnam should set up a strong roadmap for reforming SOEs and make clear the goals and requirements of the SOE reform. In his speech at the event, Vietnam’s Minister of Planning and Investment Bui Quang Vinh admitted that a large number of SOEs have been equitized over the past 20 years but the percentage of capital equitized in these businesses is very low, even at only five percent.
* Dinh Van An, economics assistant to Vietnamese General Secretary Nguyen Phu Trong: What do you think about the regulatory roles of SOEs when they are used as a tool to intervene in the market? In some countries around the world, do the governments give SOEs social functions, for example in poverty alleviation? Tony Blair: The world is changing very fast so if you are not able to change, you will be left behind. Closing my eyes, I imagine myself back to the time when I was the Prime Minister and when I was in the opposition to Mrs. Thatcher’s. One of the main arguments against the process of privatization was when the company has social utility and social functions. This is very important. For example, when you are talking about water, electricity, or hotels, etc. it is very easy to see arguments for privatizing because they are obviously the natural private sector. If we look at the big picture, it’s clear that over the last 30 years, countries are opening up but the state owns less [enterprises]. For the countries that applied those lessons, their evolutions are better than those of the countries that did not. The issue is how to do this effectively. It is not whether to do it at all.* Nguyen Dinh Cung, head of the Central Institute for Economic Management: It’s obvious that reform faces resistance. We are discussing a possibility to set up an agency in charge of managing SOEs. A ministry or such an agency is better at managing SOEs? Tony Blair: Resistance is everywhere when you change. But how did we overcome? For example, when I came to reform schools and education, we chose some of the schools which were very bad. Then, we began the reform and there was lots of resistance at that time. My advice is to choose clear projects that you are practical about to do reform. The best way is to reform with all resistance. I used to say about reform when I was in the government that if there is no resistance, it must be a bad reform. One of the things I learn is that you don’t need a large number of people to drive the reform. But you do need the right people and the right place to push it and when they meet the resistance, they’ll overcome it.* Cao Viet Son, former Deputy Minister of Planning and Investment: In Norway, the state sector is strong but the country still has an advanced economy. What do you think about that? Tony Blair: Norway basically has a strong private sector which is now a large part of its economy. The state also has a big impact on the economy. But I think it is quite exceptional. The management of enterprises is dependent on the government. One common argument is that you are only able to protect the public interest if you manage the enterprises. This is always an argument. But you’ve got to look at this experience. The state does not manage companies particularly well because it is slow to change. However, the state by regulations can ensure that companies obey rules. It is important. My questions is how many people would say we should go back to [the time when Vietnam had] 12,000 state-owned companies in 1992? I think the way you do it now is to go further and faster [to reform].