VCN – This was shared by Mr. Dang Quyet Tien, Director of Enterprise Finance Department under the Ministry of Finance with a Customs newspaper’s correspondent on the management and use of state capital of Vietnam’s enterprises.
|Final article: Why is equitization slow?|
|Enhancing the inspection and supervision of the SOE restructuring|
|Equitization must ensure the sale of state capital|
|Mr. Dang Quyet Tien, Director of Enterprise Finance Department|
According to the financial and business results of SOEs in 2016, most SOEs, especially economic group and State Corporation remain the stability in production and business, contributing to maintaining the macroeconomic stability and contributing to the revenue resource to the State budget (including after-tax profit after deducting amounts payable to the State budget as prescribed) despite the decrease in pre-tax profit target and the total amounts payable to the State budget compared to 2015.
Could you please share shortcomings in use and management of State capital of the enterprises?
It is a fact that the efficiency of business and production and the contribution of many SOEs are low, not corresponding to the State investment and debt, losses and large losses still occur.
The SOE administration mechanism is reformed slowly, ineffective and inconsistent with international practices and standards and the publicity and transparency are still limited. The responsibility of SOE leaders is not specific; the works of officers and policies of salaries and bonuses of SOEs is inadequate and not suitable with the market mechanism and there have no policies to encourage employees to boost the productivity at work.
The separation of State management function and function of the representative agency of State capital ownership at SOEs has been slow. The mechanisms of management, supervision, and performance of rights and obligations of agency and person that represent the ownership of state capital are not clear and effective
Many SOEs have not yet fully implemented the reporting and supervising regime with the representative agency and financial agency according to regulations. Therefore, the sum-up report to the Government and the National Assembly on the operation situation The Ministry of Finance has faced many difficulties in the whole country.
Particularly, the mechanism for handling of responsibility of the head for mistakes as well as handling of violations of the supervision and for evaluation of the performance efficiency of SOEs has not been fully and seriously implemented. The implementation of regulations on publicity and transparency is not effective.
Moreover, the efficiency and effectiveness of the inspection, examination, supervision, and audit of the state management agencies are not high. The party’s policies have been not strictly implemented and unlawful acts, risks, losses of SOEs have not detected in a timely fashion and strictly handled.
How to use and manage State capital at SOEs effectively, sir?
I think that in order to improve the efficiency of management and use of state capital investment in business activities in the enterprises, the Government should soon issue Decree No. 59/2011 / ND- CP on the transformation of SOEs into joint stock companies and decree to approve the operation regulations of the economic groups and State Capital Investment Corporation (SCIC).
Following the objective of Law 69/2014 / QH13, the State only invested capital in state-owned enterprises with 100% of charter capital in four sectors: Enterprise providing basic public products and services;Enterprises operating in the direct auxiliary sector for the purpose of national defense and security;Enterprises operating in the natural monopoly sector; and Enterprises applying hi-tech and making large-scale investment in and serving as the driving force for the fast growth of different industries, sectors as well as the economy.
For enterprises operating in other fields, they must resolutely carry out the restructuring and the transformation. The State does not need to hold shares or capital to completely eliminate the administrative interference of the State management agencies in enterprises as owners of state capital invested in enterprises.
For agriculture and forestry companies, capital investment only applies to SOEs that need to maintain and consolidate their development withholding 100% of charter capital according to Decree No. 118/2014 / ND-CP of the Government on the restructuring, renovation, development, and improvement of the operation of the agricultural and forestry companies. For loss-making companies, they shall be restructured in the forms prescribed in Law No. 69/2014 / QH13 (including forms of enterprise bankruptcy).
In order to effectively manage and use state capital, apart from SOEs of which 100% of the charter capital is held by the State subject to state investment in accordance with the regulation, the remaining SOEs which want to invest in production and business development must mainly use mobilized capital.
To ensure the finance for enterprise’s business, the State must maintain a stable interest rate; enhance efficiency of financial institutions (state financial funds) by increasing the financial resources of these institutions to support the enterprises in capital mobilization for business development upon the request for capital mobilization, or carry out many specialized credit policies for SOEs operating in some filed which are encouraged for development in accordance with the State’s policy such agriculture, rural, agricultural exports.
In addition, strengthening the role of supervision for enterprises. Both the supervision agency and enterprises have to publicize the information on the operation of the enterprises so that the investors can grasp the opportunity and favorable conditions to join the investment with enterprises.
Strengthening inspection, examination, supervision and audit in order to prevent the loss of state capital and assets during the restructuring and equitization and capital divestment; resolutely handling loss-making enterprises and ineffective and low-efficient projects in accordance with the market’s mechanism; issuing appropriate mechanism to control the capital for sale and merger of enterprises; publicizing investment, financial management, sale, income allocation, personnel assignment, equitization and capital divestment; and seriously handling weak leaders of SOEs.
Particularly, it is required to determine personal responsibility in restructure, equitization and state capital divestment in enterprises. The Ministers and chairpersons of the municipal and provincial people’s committees under the Central government and presidents of economic groups take administrative responsibility under the Prime Minister; to strictly handle leaders of SOEs, and representatives of state capital ownership in enterprises, who do not implement strictly or implement ineffectively the restructure, equitization, capital divestment in enterprises and assigned tasks in management and operation of enterprises; and requires the leaders who did not follow the law, the objectives and implemented ineffectively, causing the loss of state capital and assets must compensate and fully take responsibility under the law.
Could you please share experience in effective management from developing countries?
In order to effectively use state capital in SOEs, we can learn experience in effective management from Singapore, which is an arrangement of the representative of state capital ownership in the form of State capital business company. The Temasek Holdings of Singapore is an organization doing business in the state capital, operating in the form of enterprise, which is assessed at credit level AA and Aaa by the Standard & Poors and Moody organizations.
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Total investment list of Temasek Holding as of 31 March 2016 was SGD 242 billion, doubling compared to 2006. Temasek Holdings operates as a private enterprise, its investment decisions base on economic and business efficiency and funding is implemented via Singapore’s Ministry of Finance on the basis of the estimates of capital investment approved by the National Assembly.
Thank you very much,
According to a report of the representative agency of state capital ownership, at the end of the fiscal year 2016, there were 583 enterprises of which 100% charter capital is held by the State. In which, there were 7 economic groups, 67 State corporations, 17 one member Ltd., Cos operating in the model of parent company – subsidiary; and 492 private companies under the ministries and localities.
Total assets of enterprises in 2016 were 3,050,088 billion VND, up 4% compared to 2015. The average fixed asset ratio accounted for 36% of total assets. Of which, the Groups, Corporations, and parent companies subsidiaries had total assets of 2.818.671 billion VND, accounting for 92% of total assets; the one member Ltd., Cos accounted for 8% of total assets.
The equity of enterprises was 1,394,379 billion VND, up 4% against 2015. Of which, the equity of the Groups, Corporations and parent companies subsidiaries was 1,263,203 billion, up 4% over 2015, accounting for 91% of total equity (the economic groups was 918, 647 billion VND, up 2% compared to 2015, the corporations was 317,170 billion VND, up 8% from 2015, and the parent companies subsidiaries was 27,385 billion VND, up by 1% over 2015). The total revenue of enterprises reached 1,520,667 billion VND, equivalent to the revenue level of 2015 (in the same number of 583 existing SOEs in 2015).
By Huong Giang/ Huyen Trang