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- “It has underscored the need to professionalise the management structures of Vietnam’s
SOEs”.

Slow equitisation and management mechanism at state-owned
enterprises are raising international community questions whether another
Vinashin-type financial scandal could emerge in Vietnam.

At the annual Consultative Group meeting in Hanoi last week, development partners
reiterated the need for greater transparency and modern governance as keys to
an effective state economic sector.

Asian Development Bank country director for Vietnam Ayumi
Konishi pointed out that despite Vietnam’s intention to use World
Trade Organization accession to leverage the acceleration of reforms, the
efficiency and competitiveness of state-owned enterprises (SOEs) had not
improved.

Konishi stressed the need for separating the ownership from
management of SOEs and encouraged the government to let SOEs operate on
commercial principles.

United Nations resident coordinator in Vietnam John Hendra
said Vinashin’s financial trouble had revealed weaknesses in corporate
governance structures in Vietnam’s
SOEs.

According to the government, Vinashin’s total debts at
present are $4.5 billion, while its total assets sit at $5.4 billion. The ratio
of debt to equity is 11 that the government said “is seriously imbalanced”. The
group had to asked financial support from the government to avoid bankruptcy.

“It has underscored the need to professionalise the
management structures of Vietnam’s
SOEs. The government has already announced a package of measures to redress the
specific situation of Vinashin. It should, however, take this opportunity to
address more systematically some of the corporate governance weaknesses common
to the whole SOE sector in Vietnam,”
said Hendra.

According to development partners, if the government let
another large-scale SOE fall into financial trouble like Vinashin, it would
seriously impact on banking system and the nation’s credit ratings.

“SOEs became increasingly inefficient in channeling
investment to its most productive uses. We wonder whether Vietnam will
have a second case like Vinashin. Reform of the state sector is essential to
improved productivity and efficiency of investment,” said United States
ambassador to Vietnam Michael W. Michalak.

Minister of Planning and Investment Vo Hong Phuc said
Vinashin was “an anguished lesson” for the government, adding that the
government had recognised the gap in managing SOEs and would tighten the
management policy to those enterprises.

Michalak said equitisation was a good way to improve
governance at SOEs, but added this was processing slowly. “We have been
discussing equitisation at SOEs for three years, but I have not yet seen any
improvement. Equitisation at large-scale SOEs stands still.”

As of October 2010, 6,140 SOEs had been restructured and
rearranged under various forms such as equitisation, contracting, leasing and
selling, according to the Steering Committee for the Enterprise Reform and
Development.

There are 1,200 wholly SOEs in Vietnam operating in areas
that have an important role in ensuring macro balance or providing essential
services to society such as oil and gas, and electricity.

Vice minister of Finance Tran Xuan Ha said the slowness of
equitisation at SOEs in recent years was caused by unstable of global and
domestic financial markets.

Source: VIR