It is necessary to strengthen management of state-owned businesses, while the sector needs a major overhaul, said Pham Chi Lan, a member of the Prime Minister’s Research Board.

“The scandals at state-owned corporations like Vietnam Airlines, HCM City Power Company, and Vietnam Oil and Gas Corporation show the looseness of administrative control over state-owned companies. It is easy for staff to abuse power to misappropriate funds at state corporations,” Ms Lan commented.

Why so many violations at state-owned corporations?

The first reason, and one that is very easy to see, is the weakness of the supervisory system. In our decrees and laws, supervision at state-owned enterprises is often described by just seven lines compared to hundreds of pages within entire legal documents. The laws generally state that state employees and state-owned companies that violate the law are to be punished under the law.

Meanwhile, state-owned corporations operate in an unstable manner. Responsibility and powers are not clear between the management board and the general director. Sometimes both sides fight each other. Executive directors said that they have to report everything to management boards, while management boards say they have no real power.

It is dangerous that Vietnam doesn’t have regulations to define specific responsibility in representing state capital within state-owned corporations. According to regulations, management boards represent the state in state-owned corporations. However, state capital comes from taxes, which is paid by citizens, and is therefore not the money of any member of the management board, and there are no clear regulations as to who takes responsibility for it. People still call assets in state-owned companies as “cua chua” (as in the assets of pagodas, which are contributed by followers).

Members of management boards are appointed by the state, but many of them are not professional qualified, so they are weak in supervising the use of state capital.

At a recent press conference, the Chairman of the Management Board of Vietnam Airlines said that the government gave the green light to the corporation’s decision to buy medium-range engines for long-range aircraft. Does the government have to take responsibility in this case?

Vietnam Airlines wants to pass responsibility on to a higher level, but it must take the final responsibility for its decision. When it reported to the government, it presented various plans for the government to consider, compare and then selected the best.

Another issue that Vietnam Airlines must consider before purchasing aircraft engines is the Vietnam-US Bilateral Trade Agreement, which took effect in 2001. It is sure that Vietnam Airlines will have to fly to the US and it must use aircraft with long-range engines, not medium-range engines.

It is absurd that in 2001-2003 Vietnam Airlines defined that it would operate in the region only and bought medium-range engine for long-range aircraft. If it can’t foresee the near future, it is not worth to be a big state corporation.

All corporations are directly governed by ministries but decisions made by some state corporations that lead to serious losses for the state budget were not detected by governing ministries for a long time. Which weakness is revealed by this fact?

Governing bodies are unable to guide state corporations in terms of strategy. There are only one or two corporations operating in monopolistic areas. In aviation, there is only Vietnam Airlines (the market share of Pacific Airlines is just a handful). In the telecommunications industry, 95% of the market belongs to the Vietnam Post and Telecommunications Group (VNPT). The governing body provides strategic guidance in these fields, but it only hears the voice of one company and instructs only one, so it is easy for the governing body to lose sense.

What do you think about scandals at state corporations, where general directors take no responsibility?

In other countries general directors are supervised closely. When scandals arise, if the general directors don’t resign, the board of management will fire them.

In Vietnam, general directors are not defined as hired workers or state employees. The state appoints both general directors and management boards so none of them obey the other.

You said that state corporations need a major overhaul, but at which point will that begin, in your opinion?

The state can’t assume the management for thousands of state companies. Vietnam currently has more than 4,000 state companies operating in a variety of fields. Provinces also have their companies. Each ministry controls hundreds of companies so how can they find enough qualified people to add to management boards. So it is necessary to phase out state companies, and when they are less in number, there will be tighter management.

We have to change the management mechanism by tools, not by models. Vietnam is seeking models for state companies, for example parent-subsidiary. This model has not been tested but it has been applied quite widely. Under this model, a corporation becomes a group. If a corporation that operates in one field is not well managed, how can a group operating in various fields be better controlled?

For example, Electricity of Vietnam complains of a serious lack of capital, yet it is making massive investment in telecommunications. If it has back-bone network, why doesn’t it lease it or join with others to exploit it, rather than develop and exploit the network itself while results are questionable.

In addition, it is necessary to change the responsibility mechanism by defining which department must take final responsibility in a state corporation or ministry, otherwise nobody and no department will accept responsibility.

Source: VNE