Vietnam should let private investors be involved in managing SOEs

Professor David Dapice, a senior economist at Harvard University’s John F. Kennedy School of Government, who conducts research with the Vietnam Program, talks with VietNamNet’s Vietnam Economic Forum about economic reforms in Vietnam, especially on how to enhance the effectiveness of State-owned Enterprises (SOEs).

According to Professor Dapice, SOEs in Vietnam are granted with a lot of capital and land while the private sector faces difficulties caused by high interest rates.

Vietnam needs to curb inflation and to accomplish this, the government will have to restrict the growth of monetary and credit supply while cut down budget deficit. The measures will surely affect SOEs. This will be the matter of the new leaders of Vietnam.

He said that renovation and sustainable development are still appropriate strategy of Vietnam but Vietnam needs to restructure the role of the government and SOEs.

According to the Harvard professor, Vietnamese SOEs will have to develop like those in China. They will have to compete and attract capital by themselves, not relying on the government’s support. This will be a new thing to almost all SOEs and it is also a difficult mission.

About reforms of SOEs in Vietnam in recent years, Professor Dapice said that Vietnam has performed three extremely important reforms: 1/ granting the land use right and fields to farmers; 2/ issuing the 2000Enterprise Law to enable the easy establishment of private firms; 3/ joining the World Trade Organization and the ASEAN Free Trade Area.

However, he also pointed out some matters: the capital market doesn’t run smoothly because capital often flows to the government-selected places; the estate market is unstable good because of the bubble prices; and the quality of higher education vocational training needs to be improved.

Professor Dapice suggested some solutions to help SOEs be more competitive. Firstly, the government should stop assisting SOEs by giving guarantees for their banking loans. SOEs must be seen as independent enterprises, not a part of the government.

In some cases, Vietnam can seek foreign partners to help its SOEs operate more effectively or perform management and restructuring reforms at SOEs.

The US professor talked about the experiences in managing SOEs in India and China, which Vietnam can learn from. For example, in China, Indonesia or India, the government sells up to 50 percent of the shares of some state-owned enterprises to one private investor, instead of many. This partner can help manage the SOEs effectively because they invest their own money in the enterprises.

In China, many SOEs have to compete under the WTO rules and they have to increase their efficiency to cope with fierce competition from outside.

“Vietnam has joined the WTO but it still maintains subsidies and other methods to protect SOEs instead of reforming them to make them more effective. I think it is a strange decision. If you want to keep maintaining your SOEs, you should not join the WTO. Once you join it, you should try to make them to be effective so they can compete in the environment of WTO,” he said. – Vietnamnet

Tags: Vietnam companies, Vietnam enterprises, Vietnam SOEs