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State equity in firms poorly managed
State equity in former State-owned enterprises that have been equitised remains poorly managed due to the overlapping authority of ministries and provincial governments, State Capital Investment Corporation deputy director Le Song Lai told a conference last week on management of state assets.
"Even in equitised firms, ministries and provincial authorities still intervene in management, which undermines corporate governance and results in a lack of professionalism and accountability," Lai said.
The authorised representative of State capital in many of these enterprises has not been identified, said Tran Tien Cuong, director of the enterprise policy research department of Central Institute for Economic Management, with the result that a number of agencies, organisations and individuals were involved simultaneously in exercising State ownership rights.
Too often, these agencies were exercising rights that, in fact, belonged to another agency, Cuong said.
"The result is an overlap and duplication of management efforts," he said, "leading to ineffective use of State capital."
Part of the problem is that State-owned enterprises continue to be managed under the aegis of various ministries or local governments, while the State interests in joint stock companies, including former State-owned enterprises that have been equitised, is managed by the State Capital Investment Corporation (SCIC).
"Currently, the SCIC is managing State assets in smaller firms, but it doesn’t serve this function for State-owned groups or corporations," said Institute of Economics director Tran Dinh Thien.
"Corporations and groups hold an enormous amount of State capital frequently operate in their sectors on nearly a monopoly basis," Thien said, "but it’s hard to understand how well they are doing if we don’t have any specific office responsible for their management."
While State-owned enterprises contributed approximately 40 per cent of State budget revenues, according to SCIC data, "only about 44 per cent of State-owned enterprises are profit-making, while nearly 20 per cent make losses every year," Lai noted.
"Managers need to be consistent in determing the return on State assets, how much State enterprises should contribute to the nation’s economic development," argued Thien. "If holding State assets benefits the enterprises but a sale of those assets would benefit economic development, the assets should be sold."
Ministries and provincial authorities should be removed altogether from management of State enterprises, urged Cuong.
"There could be an unique office to manage State capital in all sectors, but it should have specific policies with clear criteria for administrating capital in groups and corporations, as well as in equitised companies," Cuong said.
Mentioning the role of SCIC in management state asset and capital, attendants agreed that it was a worth-developing model for state capital management. "During the three recent years, SCIC has initiated in divesting state stakes in enterprises, helping boost up the effectiveness for state sector," Thien said.
The SCIC was already managing State interests in 800 enterprises, he noted – but that raised the question as to whether the SCIC had been successful in its management.
"The stock market has been swept under a financial tsunami, which has had an impact on our ability to divest State interests in enterprises," said SCIC director Tran Van Ta.
"In theory, we could sell the State stakes in all these 800 firms," Ta added.
"We were originally established to administer the State holdings in all enterprises, similar to Singapore’s Temasek Holdings. However, after three years in operation, we still need to learn more from other models worldwide."
VietNamNet, vietnamnews
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