Leading SOEs make up 40 percent of GDP?

Dr Nguyen Quang A, a well known economist in Vietnam, has doubts about the released figures which suggest that leading state owned enterprises (SOEs) make up nearly 40 percent of the GDP.

VietNamNet would like to introduce the article by Nguyen Quang A published on Lao Dong newspaper.

In the past few years, working sessions between the Government and representatives from state owned economic groups and general corporations have been held annually. At the conferences, the leading SOEs reported very impressive achievements as their contributions to the national economy. And each time they would complain about the difficulties they have to face and ask for the support from the State. They also ask for the permission to raise the prices of their products, or otherwise they would “incur heavy losses from selling below the production costs”, and warn about the negative consequences if their claims are not satisfied.

The complaints by the leading SOEs are never ending and SOEs have been described as the pampered children who demand that parents’ grant their every wish

Let’s look at the figures published on the government’s website to assess the the performance of the leading SOEs.

“The most important indexes on turnover growth, profits and debts, show that the leading SOEs, which make up approximately 40 percent of GDP, play an important role in helping the country soon overcome the impact of the global economic crisis so Vietnam can be listed among the ten countries with the highest GDP growth rates in the world”.

The total stockholder equity of the economic groups and general corporations has reached 540,701 billion dong, an increase of 11.75 percent in comparison with 2009. The total turnover of 2010 reached 1,173,489 billion dong, an increase of 36 percent in comparison with 2009.

Twenty out of 21 economic groups and general corporations have reported estimated pretax profit of 70,778 billion dong in 2010. The total sum of money that the enterprises paid to the state budget was 173,549 billion dong, an increase of 31 percent in comparison with 2009.

The figures, if exact, are impressive.

Let’s look more carefully into the above figures. The pre-tax profit is equal to 6.03 percent of the total turnover and 13.1 percent of the stockholder equity. Meanwhile, the inflation rate was 11.75 percent. This means that the leading SOEs obtained real profit (13.1 percent was higher than 11.75 percent).

The figures on the state budget contribution do not mean much. The majority of the money paid to the state budget comes from crude oil exports, which belong to national resources anyway.

Twenty out of 21 enterprises reportedly made profit. This would imply that the only unprofitable enterprise was Vinashin, reported by local newspapers as bogging down in debts. However, they are wrong. Since the only unprofitable SOE was the Electricity of Vietnam (EVN), then If Vinashin also took loss, the number of unprofitable enterprises should be 19, not 20. Does that mean Vinashin made profit in 2010, after all?

According to the General Statistics Office (GSO), the GDP in 2010 was 1,980,914 billion dong. The total turnover of the enterprises was equal to 59.24 percent of GDP. It is claimed that they “made up approximately 40 percent to GDP”. What does the figure of 40 percent mean?

Also according to GSO, the ratios of the contributions made by the state sector to GDP were 38.52%; 38.40%; 38.38%; 39.08%; 39.10%; 38.40%; 37.39%; 35.93% and 34.35% for the years from 2000 to 2008.

The concept of the “state sector’s contribution to GDP” is understood as including the non-business fields, such as the state management and national defense (2.77 percent in 2008), education and training (2.61 percent), healthcare, sports, and other fields.

Therefore, the actual contribution of the state sector to the GDP would be between 30 and 31 percent in the years from 1998 to 2003, 31.29 and 31.33 percent in 2004 and 2005 respectively, 29.46, 28.15 and 27.17 percent in 2006-2008.

If so, SOEs made up 27 percent to GDP in 2008, and the contribution of the big economic groups must not be higher than that figure

The national economy’s structure has not seen any considerable changes in comparison with 2009 and earlier. And according to GSO, the ratio of GDP contribution of the leading SOEs to non-business fields is 7.05 percent of GDP in total, nearly the same as the figure for 2008. Therefore, the contribution by the state economic sector to GDP must be 27 percent, not 40 percent.- Lao dong

Tags: Vietnam companies, Vietnam enterprises, Vietnam SOEs