Executive summary

The Government of Viet Nam has taken important steps in recent years to improve its ownership and corporate governance frameworks for state-owned enterprises (SOEs). Viet Nam established the Commission for the Management of State Capital at Enterprises (CMSC) – a ministry-level entity – with a view to improving efficiency, facilitating equitisation and separating ownership of the country’s largest 19 SOEs and state corporate groups from the state’s regulatory function. It enacted a new Enterprise Law, subsequent Decrees and circulars to guide the streamlining of the SOE sector. The number of SOEs has been reduced from 12 000 in 1990s to around 2 100 today thanks to the government’s extensive divestment and equitisation programmes.

In terms of next steps, the government recently announced its intention to revise Law No. 69/2014/QH13 on Management and Utilisation of State Capital to bring it more in line with the SOE Guidelines as well as a 5-year roadmap to adopt International Financial Reporting Standards (IFRS). It has also recently made substantial commitments by signing Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Viet Nam Free Trade Agreement (EVFTA) which would necessitate further reforms in the SOE sector in the years to come.

Despite these achievements and the continuing reform agenda, Viet Nam still faces many challenges in further improving SOE governance and efficiency. State-owned enterprises still account for one-third of gross domestic product and dominate many of the sectors such as energy, transport, telecommunications and finance. While the government has made great strides in establishing and implementing a legal regulatory framework for state ownership, it is still a work in progress, with a lack of institutional and capacity for enforcing relevant laws. Viet Nam has yet to develop a concrete and unified ownership policy. The policy framework for state ownership builds on a number of documents delineating state ownership rights and responsibilities across government representatives.

The powers of the new state ownership entity CMSC place it, in OECD vernacular, somewhere in between being a state ownership agency or a state co-ordination agency. It has a co-ordination power over SOEs in its portfolio, but a number of important decisions can be taken only in concert with other government bodies. Moreover, due to the CMSC’s relatively limited resourcing and lack of in-depth sectoral knowledge across its portfolio of SOEs, line ministries in practice continue to play an important role in the control of the companies that are in the portfolio of the CMSC.

For this and other reasons, state ownership and market regulatory functions are in practice still exercised in concert in many cases. In addition to the institutional placement of oversight roles, a second complication arises from regulations on the management and use of state capital vested with SOEs. These are often so closely aligned with the government’s public policy objectives that they allow only a limited distinction between production and business activities of SOEs and the state’s exercise of political powers. While Vietnamese law does not explicitly confer legal privilege to SOEs or board members, SOEs are treated “favourably” in all aspects including by the government, sectoral ministries and local governments who give their affiliated SOEs privileges such as access to capital, natural resources, land, and human resources. Competition enforcement powers against anti-competitive behaviour by SOEs in practice remain limited and they generally do not extend to policing a level playing field.

The degree of disclosure and quality of information (both financial and non-financial) vary depending on the responsible line ministry or controlling stakeholder, with many SOE websites appearing non-compliant. There is weak disclosure for SOEs where the state holds 100% of chartered capital and information on debt obligations of SOEs is not publicly available. While the government submits the aggregate report to the Prime Minister and the cabinet member, the state does not have in place a dedicated website which publishes the information contained therein and on individual SOEs.

More remains to be done to assure a strong, autonomous role for SOE boards of directors. The processes applied by governments to nominate and appoint SOE board members are often influenced by the degree to which the state has professionalised its enterprise ownership function, the size of the state’s ownership stake in an SOE, and the balance between commercial and non-commercial priorities. Politically motivated ownership interference leads to unclear lines of responsibility and a lack of accountability and efficiency losses in the corporate operations.

The existing mix of in-company state and Party control procedures with business practices aspiring to meet international standards creates substantial challenges to effective internal control of SOEs – particularly but not only in those 100% owned by the state. It appears that one of the most effective corporate ‘checks and balances’ is the Party Committee, which may be providing disincentive for the true adoption of international practices in internal audit and corruption-risk management.

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