Stronger Whip on State-owned Firms

The growth rate of 10 % is a target assigned to State-owned economic groups and corporations by the Prime Minister. State-run groups and corporations are struggling to ensure macro-economic stability and regulate socio-economic development objectives.

On March 10, in Hanoi, the Prime Minister worked with leaders and representatives from more than 100 State-owned groups and corporations to discuss tasks and solutions to be applied in 2010.

Solid growth

According to the Steering Committee of Business Reform and Development, the State is now holding VND492.5 trillion of capital in economic groups. In 2009, revenues exceeded the yearly plan by 42.4 % and accounted for 40 % of the country’s GDP, a rise of 2.9 % compared with 2008. Several corporations made progress after suffering earlier losses.

Generally, a combined profit before tax of State-owned groups and corporations reached VND80,799 billion, surpassing the annual plan by 52.8 %, an increase of 5 % compared with 2008. The total budget payment was VND175,406 billion, beating the annual target by 40.5 % but suffering a decline of 7.3 % compared with 2008.

Key groups like the Vietnam National Oil and Gas Group (PetroVietnam) are accelerating export to US$6.2 billion, up 28 % from the yearly plan. The Vietnam National Coal – Mineral Industries Group (Vinacomin) supplied enough of coal while pledging to keep the price unchanged. The Vietnam National Textile and Garment Group (Vinatex) lived through difficulties and searched for new markets to ensure good jobs for 119,000 people and export value of US$1.7 billion.

Food trading companies in Vietnam purchased all farm produce from farmers; thus, beating the annualised revenue of over 22.4 % of the plan, Viettel Group also beat the annual plan. Saigon Transport Mechanical Corporation exceeded the full-year objective by over 26 %.

According to reports, the average income of workers in State-owned firms reached VND5.1 million, up 9.9 % compared with 2008.

Addressing at the meeting, Prime Minister Nguyen Tan Dung said: “The prices of electricity, coal and transport have not be raised while telecom charge repeatedly reduced. Buying prices of rice and rubber must ensure a good profit for producers. This is one of typical activities of State-owned enterprises, not only pursuing production, sales and profit but important political task.”

Last year, State-owned groups and corporations reshuffled 72 member units, mainly by selling shares to the public. They also focused on investing in core production activities in addition to auxiliary operations, limiting investment in highly-risk and noncore fields like banking, securities and real estate. They also reviewed investment projects to enhance the investment efficiency.

However, according to the Steering Committee for Enterprise Reform and Development, typical limitations of State-owned groups and corporations are the inability to take advantage of their large-scale operations and large capital sources. Their investment projects are usually time-consuming and ineffective and production costs per unit have not been reduced to the minimum; thus cost prices are high, product quality is low and competitiveness on global and domestic markets is weak etc.

Dissolution of loss-making units

The Prime Minister stressed that there will be no room for many-year loss-making State-owned enterprises like The Vietnam Sericulture Corporation (VISERI) and loss-making enterprises will be certainly dissolved. He hailed outperformers in the hard time like Cienco 5.

The Prime Minister also confirmed that prices of key items such as electricity and coal will be kept stable until the end of this year. Foreign exchange rate and interest rate will be flexibly regulated, basing on market conditions. Concerning foods, State-owned enterprises will purchase commercial rice to the maximum and expand distribution systems to ensure a profit for farmers and actively regulate the market.

Upcoming tasks and solutions for State-owned groups and corporations are to continue reshuffling and renovating corporate operation, corporate governance and heightening responsibility and integrity. They need to review business production plans, focus on investments to improve their production and business activities, increase working productivity, economic efficiency and competitiveness. Effective projects and products, including overseas investments, will be given most support from the Government.

In addition, corporations play very important role in implementing inflation controlling policies and ensuring social security. The adjustment to prices of key goods will be still based on the law of market, but the time of changing needs to be taken into consideration. They must explain the clear cause for the change, avoiding triggering a race of raising prices. They need to take care of their employees, work with the Government in to implement poverty reduction programmes and charitable activities, and actively and timely remove barriers against production and business investment activities. They also need to protect domestic production in accordance with integration commitments and encourage exports.

In 2010, the Prime Minister assigned State-owned groups and corporations operating in all economic sectors to strive for a GDP growth of 6.5 % and inflation growth of 7 % or lower set by the National Assembly.

Tags: Vietnam enterprises, Vietnam state-owned firms