Call for state-owned firms to become more transparent

The deputy head of the Central Institute for Economic Management (CIEM) Nguyen Dinh Cung, spoke to Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) about transparency at State-owned enterprises.

Having conducted extensive studies on corporate management, why do you think that transparency can improve State-owned enterprises (SOEs)?

When making a profit, SOEs usually think it’s a result of their successful business operations but when suffering losses, they blame it on having to fulfil their social responsibilities. That situation is unfair and creates barrier to positive development.

It’s good for SOEs to be under the same competitive pressure or face market risks as other enterprises. If this was the case, SOEs would perform better and they would develop more initiative in adapting to market changes and gaining public confidence.

One of the most decisive factors in increasing transparency is to publicise information about the operation of State-own enterprises and groups.

If the enterprises don’t publish information and persist with the idea that they will still survive without innovation and effort even if they suffer losses, then they cannot do business well in an open market. Lack of transparency also leads to violations including bribery, corruption and speculation.

So, it is badly necessary to force SOEs to publicise information about their operations and financing because SOEs are not private assets of individuals ororganisation but a social asset. Their operations must be overseen by society.

The enterprises’ yearly objectives, revenue and 5-year business plan must be publicised.

Is it unfair for SOEs to face competitive pressure and operate like private firms while also having to fulfil their social responsibilities?

In my opinion, the State should not ask SOEs to take responsibilities in regulating the market or macro economy because the move goes against market rules. The Government has to control and regulate market with laws instead.

Taking electricity as an example, it’s time for the State to offer an equal chance for all enterprises to distribute power instead of having a single distributor. So, the State doesn’t need to closely watch whether the distributor abuses its monopoly role in governing the market while ensuring consumers’ rights. In addition, the move would relieve a burden for enterprises.

What are your major concerns on investment made by SOEs?

State investment including SOEs’ investment plays an important role in the country’s current growth. However, the fact shows that it’s time to change a model of growth that is based on capital investment increases, low productivity and low investment efficiency.

The increase of State investment is one of the factors causing a macro imbalance, through which the macro economy becomes less and less stable. The increase also raises overspending in the State budget, widens the gap between savings and investment, widens the current trade deficit and accumulates national debt. All these moves have weakened the major foundations of the economy as well as the Government’s position in macro economy management. As a result, the economy becomes less stable and more vulnerable to external influences.

Notably, in recent years, real State investment usually exceed planned investment. For examples, last year, the Government planned to allocate VND125.5 trillion (US$6.1 billion) for investment but real spending was over VND180 trillion ($8.8 billion), resulting in overspending of $2.7 billion.

The question is which authority has jurisdiction to change the allocation. If the investment plan had been followed strictly, last year’s total overspending would have been lower, about 3.5 per cent of GDP, an ideal proportion for the country to stabilise its macro economy. Moreover, Viet Nam’s macro economy would not have faced alarming imbalances as witnessed last year, especially when the Government’s financial policy and monetary policy worked together better to curb inflation and stabilise the macro economy.

Source VNS

Tags: Vietnam companies, Vietnam enterprises, Vietnam SOEs