SUMMARY 

A. The main recognitions and policies

The reform of State owned enterprises is one of focuses and the most sensitive and difficult reform sector during the conversion from the central planning economy to the market economy. It is because the reform of State owned enterprises is not only the economic matter, but also the matter of thought, politics, society and psychology.

I. The main recognitions, policies and legal framework for the reform of State owned enterprises

1. The main functions and tasks of State owned enterprises during the conversion to the market economy

- Being the important material tool for the State to orient, regulate, stabilize prices, and ensure the major balances contributing to the macro-economic stability.

- Supplying goods and services serving directly the defense, the security and the essential goods and services that the market cannot ensure supplying in order to maintain the social welfare.

- Investing to the areas having the particularly difficult socio-economic conditions.

- Applying the advanced technology, creating the motive power for the other branches, sectors and the whole economy.

- Being the main force for the international economic integration.

2. Field of action of State owned enterprises

The State owned enterprises focus on several sectors of infrastructure, manufacture of production materials and important services of the economy, as well as a number of public benefit sectors. The participation of State owned enterprises will decrease in the sectors where the other economic components are able to undertake and run better in order to concentrate on the core sectors.

II. Policy of the reform of State owned enterprises

1. Equitization

* Nature of equitization:

The equitization is the conversion of the enterprises, with one owner that is the State, operating under the legal forms of State owned company, sole member limited liability company to the enterprises, with numerous owners, operating under the legal form of shareholding company as stipulated in the Enterprise Law.

* Objectives of equitization:

- Converting the enterprises that the State doesn’t need keep 100% of capital to the form of enterprises with numerous owners.

- Mobilizing the domestic and foreign investment capitals to improve the financial ability, renovate the technology and the management mode.

- Promoting the real owner role of workers, shareholders, and the social supervision over enterprises.

- Ensuring the harmonization of benefits among State, enterprises, investors and workers in the enterprises.

* Method of executing the equitization:

The execution of equitization focuses on the following points: (i) objects and conditions of equitization, (ii) forms of equitization and kinds of shares, (iii) subjects and conditions of buying shares, (iv) settlement of finance and evaluation of enterprise value, (v) execution of selling shares, and (vi) process of equitization.

2. Renovation of organizing and managing the State owned enterprises running for public benefits outside the scope of equitization

The Government promulgated the Decree 31/2005/NĐ-CP on producing and supplying goods and services of public benefit, and the Decree 95/2006/NĐ-CP on the conversion of the State owned company to the sole member limited liability company, in order to renovate the mechanism of producing goods, services of public benefit and organize, manage the enterprises that the State need to hold 100% of charter capital, among them including the enterprises running for public benefit.

III. State owned corporation, nature, objectives, and establishment

1. Nature of the economic corporation

In Vietnam, the economic corporation is defined as the group of large scale enterprises including the companies having the independent legal status; taking form on the basis of assemblage, association by means of investment, capital contribution, merger, buy-back, reorganization or the other association forms; having long attachments to each other in terms of economic benefit, technology, market and the other business services in order to create the business combination with more than two levels of enterprise, under the form of holding company-subsidiary.

2. Establishment objectives of the State owned corporation

The establishment of the State owned corporations aims to achieve the following essential objectives:

- Investing and mobilizing the resources to establish the groups of large scale companies in the core sectors needing to develop, improve the competitiveness and international economic integration.

- Ensuring the economic security and the large balances of the national economy; applying the advanced technology and making the motive force for the other sectors and the whole economy.

3. Establishment and operations of the State owned corporation

Nowadays, there are only 01 article in the Enterprise Law and 01 article in the Decree 139/NĐ-CP about the State owned economic corporation. However, the contains of these two articles do not ensure sufficiently the legal framework for the establishment and operations of the State owned corporations.

B. Context of State owned enterprise reform

After nearly 20 years of patient execution, the reform of State owned enterprises achieved some significant results.

I. Equitization

1. Achievements

Through more than 16 years of execution, the equitization of State owned enterprises acquired several main achievements.

- The actual legal framework of equitization defined more clearly the objectives of equitization; widened the scope of equitized enterprises in terms of business activities and enterprise scale; enlarged the scope of subjects having the right to buy shares for the first time; allowed using the different methods to evaluate the enterprise value…

- The equitization is considered as the main solution in the reorganization of the State owned enterprise sector. In 31/12/2008, the number of enterprises with 100% of state owned capital executing the mode of equitization accounted for 71% of the reorganized State owned enterprises.

2. Weaknesses, limitations and causes

* Weaknesses and limitations:

- The equitization progress of the State owned enterprises is usually late as compared to the plan, especially the large-scale enterprises and the ones operating in the finance and the banking.

- During the equitization, the mobilization of capital from the exterior organizations and individuals is limited; as a result, the state owned capital amounts to a large proportion in the charter capital of the equitized enterprises.

* Causes:

Changes in the law on equitization and the late promulgation of guidance circulars; context of inflation, monetary restriction, recession of the world economy in 2007 and 2008; the increasingly large scale of equitized enterprises…

3. Solutions

In order to speed up the equitization, it is needed to perform the two main groups of solution: (i) legal stipulations and policies concerning the equitization of State owned enterprises, and (ii) the solutions related to the execution of equitization.

II. Reform of State owned enterprises of public benefit

1. Achievements

- Sharp decrease of the number of the public benefit State owned enterprises from 732 to around 400 enterprises

- Renovation in the management of the State owned enterprises of public benefit

- Settlement of the dispersion of power and responsibility due to the transformation to the sole member limited liability company

2. Weaknesses, limitations and causes

Limitations in the financial management and the accounting of the State owned enterprises of public benefit; weaknesses and limitations in the mechanism of decentralization and authorizing for the bodies organizing bids and orders, as well as the mechanism of having bid and making order; lack of guidance of organizing and managing the sole member limited liability company in accordance with the Enterprise Law 2005…

3. Solutions

* In terms of legal stipulations and policies:

It is needed to revise all stipulations and policies related to the reform of the public benefit State owned enterprises in order to modify and complete synchronously.

* In terms of method of execution:

The Ministries, people’s committee of provincial level need to revise, report in order to adjust the itinerary of arranging and converting the public benefit State owned enterprises to the sole member limited liability companies in conformity with the time limit for conversion of the State owned companies (01/07/2010) and with the particular conditions of each enterprises.

III. Organization, management and operations of the State owned corporations

1. Achievements

- Almost all the pilot State owned corporations are the large-scale combinations playing the important role in the core business activities and sectors of the national economy, and are the important tool for the State to regulate the macro-economy and stabilize the market.

- The State owned corporations mobilize successfully the capital of the exterior organizations and individuals through the equitization and the establishment of the new member enterprises under the form of the shareholding company or the limited liability company with more than one member.

- The organization structure and management of the State owned corporations begin to take form with the association between the holding company and the subsidiaries.

2. Weaknesses, limitations and causes

All the pilot corporations are established, organized, managed and operate on the basis of the particular legal documents promulgated by the Prime Minister, which stipulate essentially the holding companies, and do not embrace the whole process of establishment, organization, management and operations of all the State owned corporations.

3. Solutions

* In terms of legal stipulations and policies:

It is needed to build up the synchronous legal framework for the establishment, organization, management and operations of the State owned corporations in order that these corporations can perform their objectives.

* In terms of executing:

The concerned Ministries and branches need to revise the important contains of the approved Project on the establishment of the economic corporation in the way to reduce, postpone the investment progress in the unnecessary and unfeasible fixed assets; verify the plan of capital contribution, shares buying of the other enterprises, especially the capital contribution, shares buying of the banks and financial organizations.

Source: VNEP, June - 2009