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SOEs still keep cement positions in lucrative business fields
After 20 years of reform, the number of state owned enterprises (SOEs) remains relatively high, while SOEs have not abandoned the lucrative business fields such as real estate or retailing.
The reform goes too slowly
Bui Huy Son, a well-known economist in Vietnam from the World Economics and Politics Institute, said that the State could not do business and make profit itself, while it just needs to help businesses and people do business and get rich. The State should only set up businesses in the fields, where private investors cannot do or do not want to do, but the fields are very important to the socio-economic development.
This means that the State should withdraw from many business fields to focus on some main fields that play important role in the national economy. In 2002, people, for the first time, could access to the list of the business fields that the State would hold 100 percent of capital or 50 percent of stakes, and the fields, where the State does not need to hold capital.
At that time, the State still carried out business activities in 46 fields and held the controlling stakes in 47 fields. By 2004, the number of business fields where SOEs held 100 percent of capital had dropped to 29. Also by that time, the State had withdrawn entirely from 8 business fields.
By 2007, 100 percent state owned enterprises had only existed in 19 fields.
In 2005, the new Enterprise Law was promulgated which declared the death to the concept of “State owned enterprises”, when it requests to shift all SOEs to operate as limited companies or joint stock companies.
Especially, the State has been, step by step, reducing its control in some monopoly business fields, such as coal, petroleum and electricity. Since December 2009, the petroleum retail price has been floated, while enterprises have the right to define retail themselves after discussing with the management agencies. The right to define the electricity retail prices has also been given to the Electricity of Vietnam
SOEs still cement positions in many business fields
The report by the Ministry of Planning and Investment shows that SOEs still hold big proportions in the fields that the State does not need to hold controlling stakes.
By September 30, 2011, 64 percent of 100 percent state owned enterprises subject to restructuring, have still not been completed the restructuring. These include 39 enterprises belonging to the Ministry of Transport.
Pham Duc Trung from the Central Institute of Economic Management CIEM has pointed out that SOEs still exist in nearly all business fields of the national economy, especially; the proportions of SOEs in the fields of retailing, real estate, hotel and tourism remain very high.
According to the institute, by 2010, only 6 percent of SOEs operated in national defense, 24 percent of SOEs operated for public benefit. Meanwhile, 70 percent of SOEs simply had done business for profit.
As such, the SOE reform in the last 20 years has not had any clear impacts to the re-allocation of the state resources, while it had not created any big changes in the State’s role in a market economy.
While SOEs still have been doing business for commercial purposes, their business efficiency is not high. The ratio of profit on capital of enterprises in electricity, water, gas, construction, processing industries, trade, and milk is just 2.3 percent, while the enterprises account for up to 60 percent of total SOEs, and hold 67 percent of the total non-financial SOEs’ total capital.
Pham Huyen
vietnamnet
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