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For State-owned enterprises to continue maintaining economic "leading role"
20/7/2018 10:51' Send Print
Illustration photo: VNA

Main achievements and limitations

Undergoing different stages of establishment and development, SOEs have always gone along national economy building. In the state-subsidized centrally planned economy, SOEs and cooperative economy played a key role in the economy. Entering the renovation stage with a multi-sector economy, SOEs have still played an important role as one of the three pillars of the economy. Compared to the private and foreign direct investment economic sectors, SOEs are still a material force with strong financial potential, resources, land, trademarks, labor force, scientific, technical and managerial staffs. Today, SOEs have shifted to concentrate on key sectors of the economy or areas where private enterprises do not invest. SOEs which are continuing to develop are large-scale, highly specialized businesses operating in areas where society is in great demand to truly become a core force to ensure large balances of the economy and achieve socio-political objectives of the Party and State.

After recent rearrangement and equitization, there remain 652 SOEs, including 9 groups and 65 corporations, operating mainly in key areas, ensuring macro balances for the economy, public services, security and defense. The preservation and growth of capital are encouraging; in only 5 years from 2011 to 2016, the total assets of enterprises with 100% state capital increased from VND2,093,000 billion to 3,053,000 billion up by 45.8%; owners’ capital rose from VND727 thousand billion to 1,398,000 billion, up by 92.2%. SOEs’ business efficiency in terms of profit-generation and contribution to the State budget is relatively positive. In the period of 2011-2016, big SOEs contributed over VND1,000,000 billion, among them the Vietnam National Oil and Gas Group contributed VND147,941 billion dong, the Military Telecom Industry Corporation VND131,400 billion. The management and use of assets in many enterprises are basically in accordance with the law. The quality of assets of enterprises has been improved step by step. Many enterprises have paid attention to upgrading, and renewing the application and mastering technologies and equipment, thus facilitating productivity and quality improvement, saving material, ensuring the highest quality of products and investment efficiency, contributing to production and business of enterprises. Enterprises’ operation and supervision of production and business activities have been increasingly transparent and more effective; they have timely rectified weaknesses in order to improve sense of responsibility in law observance.

In addition, SOEs have also carried out socio-political tasks in a number of areas, acting as “pacesetters” creating a motive force for development to attract other economic sectors to actively participate and contribute to industrialization and modernization of agriculture, rural areas, join hands to build new rural areas, take part in local activities, contribute to stabilizing local political and social security and make great contribution to national socio-economic development. SOEs have best guaranteed laborers’ wages, income and benefits. Party organizations, trade unions and other socio-political organizations have strongly been active, clearly demonstrating their roles and positions in SOEs.

Apart from achievements, SOEs’ operation efficiency has not yet matched with resources they are holding. Revenue, profit before tax and remittances to the state budget have been growing slowly; they have not really brought into full play the core role in the economy to lead and encourage entities of other economic sectors to develop and create a driving force for economic development.

Many SOEs have not paid much attention to in-depth investment, technology and equipment innovation, production techniques, labor productivity improvement, science and technology application and development. SOEs’ monitoring has been assigned and decentralized, but monitoring effectiveness is not high.

Despite constraints and weaknesses, the role of SOEs in the socialist-oriented market economy is undeniable. It is indispensable and inevitable for SOEs to face with challenges and difficulties in the process of establishment, development and self-confirmation.

For State-owned enterprises to fulfill its role as "pacesetters" of the economy

In terms of perception, we all see that the state-owned economy plays a very important role. With the cooperative economy, it lays the foundation for the socialist economy. Only when these two economic sectors operate effectively will the new socialist economy be fully established. But in the transitional period to socialism, our economy contains a mixture of all economic sectors, and no economic sector will hold the dominant and key position in the economy. Thus, the competition to confirm the role of the state economy is very difficult and complex.

A new perception with a broader implication is that the state economy in which SOEs play a pivotal role along with other economic and financial potentials, such as the state budget, financial funds, and resources and land belonging to people ownership will play a key role in the economy, no economic sector can be comparable. In line with State policies, the state economy will lead economic development following socialist orientation. That is the relationship between politics and economy, between the superstructure and the infrastructure. This relationship was indentified by Marxist-Leninist classics. Nevertheless, if the state economic sector wants to maintain its key role, and lead the economy with SOEs as the core, it has to win and strive beyond itself, even transform some its components into state capitalists, and contribute capital to enterprises or equitize enterprises. Given such involvement, as V.I. Lenin put it in "state capitalism," there were "three quarters of socialism." Countries advancing from small production to socialism and bypassing the stage of capitalist development are forced to go through "two stations," which include "state capitalism and inventory-control." State capitalism with mixed state and private capital is a transitional period, so that the use of capital resources of the whole society is more flexible and effective. Therefore, it is important to realize that SOEs are not only 100% state-owned enterprises but also those enterprises which the State holds controlling shares.

In practice, in the world, SOEs are a relatively popular form of enterprises in many economically developed countries, such as the United States, Germany, Britain, France, New Zealand, among others. Most of them are either large or very large, especially in the development and exploitation of technical infrastructure, mining, finance, environment, post and telecommunication, and public services. In some countries, equitized SOEs are transferred to private companies for management which is not effective and causes social resentment. The States bought them back to reorganize, manage and operate for public services.

The issue of orienting SOEs development has also been reviewed and summed up during each period of national development. The 6th Party Congress marked a fundamental turning point in economic reform in general, including state-owned enterprises. The documents of the 6th Party Congress stated: "It is necessary to renovate the management mechanism to ensure that the state economic units have the right to autonomy to truly transfer to socialist business accounting and restore order in economic activity." Subsequently, through Party Congresses, our Party issued many resolutions and conclusions showing consistency and creative development in viewpoints, lines, purposes, requirements and tasks to continue arranging and renovate SOEs.

Resolution No.12-NQ/TW adopted at the 5th session of the 12th National Assembly dated 3 June 2017, on further restructuring, renewing and raising the efficiency of state enterprises, identified one of the leading viewpoints: "State-owned enterprises operate under the market economy mechanism, taking economic efficiency as the main criteria for assessment, autonomy, self-responsibility and equal competition with enterprises of other economic sectors as prescribed by law. Ensure transparency and accountability of state-owned enterprises. Separate the task of production and trade of commercial goods and services from that of producing or supplying public services and goods ." At the same time, the Resolution proposes measures to renovate mechanisms and policies for SOEs to operate under the market mechanism, aiming to ensure equal treatment between SOEs and enterprises of other economic sectors, SOEs’ autonomy and self-responsibility, clearer relationship between the State and SOEs in accordance with the market mechanisms to ensure the highest efficiency of SOEs.

To achieve the overall objective of "restructuring, renovating and improving the efficiency of state-owned enterprises on the basis of modern technology, innovation capacity and international standard governance to mobilize, allocate and utilize effectively social resources, preserve and develop state capital in enterprises so that SOEs can maintain their key position and be an important material force of the State economy, contributing to promoting economic development, social progress and equity," SOEs should be reorganized in line with the market mechanism; SOE equitization should be accelerated; and the State only operates critical branches and areas in the national economy. In equitization, the State may sell all its shares or retain controlling shares or hold shares to lead enterprises, hold non-controlling interest or convert SOEs to public service enterprises. However, the State can also maintain its capital contributions in some truly effective businesses to benefit from dividends to supplement the State budget, or spend on social security and welfare.

It is necessary to continue to improve policies and laws on the management and use of state capital and assets in enterprises in a synchronous, adequate, timely manner and on the basis of review, evaluation and submission of reports to the National Assembly to amend and supplement relevant laws, especially to study and revise SOE criteria in line with Resolution No.12-NQ/TW, to fill legal gaps in the management and use of State capital, and assets in enterprises where the State holds controlling shares or capital. SOEs and enterprises of other economic sectors are treated equally but SOEs must be managed by a separate mechanism because they are capital and assets of the State and owned by the entire people.

It is necessary to assign and direct each ministry to well perform the state management role in its branch or sector, overcome constraints, review and clarify mistakes committed by ministries in the past process. Continue directing the handling of violations in the management and use of State capital and assets at enterprises and SOE equitization; direct ministries and branches to implement the conclusions of the Government Inspectorate and the State Audit.

Further consolidate activities of economic groups and State corporations in line with the resolutions of the Party and the National Assembly. Firmly handle SOEs and investment projects which are delayed, suffer loss and fare badly. Review mechanisms and policies to remove difficulties in resolving financial, labor and scientific and technological policy problems in order to raise the quality and efficiency of a number of enterprises which were restructured but their production and business have yet been optimistic.

Consolidate organizational apparatus, clearly define authority and responsibilities of the State Capital Management Committee at enterprises, early separate the function of ownership from that of management of SOEs. Review and assess the operation model and functions and tasks of the State Capital Investment Corporation in order to ensure that they have abided by the policy to divest state capital from areas where the State does not need to hold capital.

Intensify inspection, control and supervision of the implementation of policies and law on the management of State capital and assets at enterprises and SOE equitization. Be fully aware that self-control plays an important role in ensuring enterprises’ resistance through open and transparent internal controls and that it is a vital issue for SOEs.

Renew the organizational model and leading style of party organization and operation of socio-political and professional organizations in SOEs, improve the efficiency of mass organizations in order to protect the legitimate rights and interests of laborers in SOEs.

Economic groups and State corporations must renew their mindsets, ways of thinking and doing things in the new context. Continue renovating business administration, completing managerial apparatus, intensifying training and fostering business managers to meet administration requirements in the market mechanism, selecting cadres who have experienced different managerial positions, are really capable of leading SOEs. Train human resources, considering labor quality the precious capital of enterprises. Concentrate on key branches and businesses. Develop roadmap for and withdraw capital from enterprises to which SOEs contributed capital, ensuring transparency, bringing highest benefits to the State. Actively apply scientific research, take the lead in scientific and technological renewal and in the fourth industrial revolution, invest in renewing technologies, products and services in order to raise added values and competitiveness of products and services.


This article was published in the Communist Review, No. 907 (May 2018)

Phung Quoc HienMember of the Party Central Committee, Vice Chairman of the National Assembly