Where have private enterprises gone? State-owned enterprises are still "higher year after year"
Agreeing with the need to remove institutional barriers for state-owned enterprises, many National Assembly deputies are still not confident about the content of the Draft Law on Management and Investment of State Capital in Enterprises.
The shirt is not only too tight
The statement of Mr. Pham Duc An, National Assembly delegate of Hanoi City, during the group discussion on the Draft Law on Management and Investment of State Capital in Enterprises last weekend put a heavy burden on the “implementer”. He called the current mechanism of state enterprise management not just “a shirt that is too tight”.
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| Mr. Pham Duc An, National Assembly delegate of Hanoi City. |
“Many people say, if you want to be like a private enterprise, then go directly into business, don't work for the state anymore. But it must be clearly defined, state enterprises are formed with the goal of being able to participate in areas of market failure, the private sector does not want to invest or be a tool to implement state policies, to achieve long-term goals; very different from private enterprises. However, the mentality of managing assets that are not one's own is often 'fear of doing wrong' or 'lack of control leading to loss, not achieving goals' is the issue that needs to be discussed when talking about state enterprises", the Chairman of the Board of Members of Agribank explained.
According to Mr. An, it can be seen that the consequence of this mentality is that regulations directly manage each business behavior, must regulate the narrowest authority of businesses for the state to manage, very afraid of letting go ...
“With these regulations, to be safe, those who comply only need to try to do business better each year than the previous year. While private enterprises have gone far, state-owned enterprises still do better each year, are still assessed as completing and completing their tasks well, but if they break the rules, they will be punished. Many times, because of behavioral management, we think that with a tight mechanism, there will certainly be no problems, so we neglect inspection, supervision and prevention, that is, we do not care about prevention,” Mr. An analyzed and mentioned the period when many state-owned enterprise leaders were punished for causing loss of state capital…
Referring to the strictness of the Law on Management and Use of State Capital Invested in Production and Business at Enterprises (Law 69), Prof. Dr. Hoang Van Cuong (delegate of Hanoi delegation) mentioned two very worrying situations.
Firstly, state-owned enterprises almost lose the initiative in deciding on production and business activities from their capital as well as the results they produce.
The discussions on increasing charter capital for Vietcombank according to the Government's proposal in this session mentioned by delegate Cuong are a typical example.
“The money we propose to increase capital for Vietcombank is the money Vietcombank has left over from profitable business, but it has to be submitted to the National Assembly for request. This is very unreasonable! Because we do not give power to enterprises, state-owned enterprises are always said to be rigid, ineffective, and less dynamic than the private sector,” Mr. Cuong clarified.
Second, despite strict management regulations, losses of state capital assets still occur in state-owned enterprises.
“We have seen a series of corporations and general companies collapse recently. But the problem is that we only take measures after they collapse, not knowing the situation beforehand. We are strict, but the responsibilities are not clear, so it is difficult to assign responsibility and handle the situation. I think this is a point that needs to be changed in the provisions of Law 69,” Mr. Cuong said at a meeting last weekend about the Draft Law on Management and Investment of State Capital in Enterprises.
In particular, according to delegate Cuong, the confusion between state management rights, management by owner representatives and business management also causes a situation where responsibilities are not clearly defined, making it difficult to assign responsibility when necessary...
There is still no solution
Although agreeing with the proposal to amend Law 69, Professor Dr. Hoang Van Cuong is not confident with many contents in the Draft Law on Management and Investment of State Capital in Enterprises that the Government submitted to the National Assembly in this session, especially the clear definition of what is meant by management of state capital in enterprises.
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| Prof. Dr. Hoang Van Cuong spoke at the group discussion on the Draft Law on Management and Investment of State Capital in Enterprises. |
According to the proposal of the delegate, the Draft Law needs to clarify some ideas.
Firstly, clarify four contents related to the management of State investment activities in enterprises, including using the State budget to invest and increase capital for enterprises; restructuring that capital, including increasing or divesting capital; the purpose of investing capital in enterprises to perform what tasks; must check and supervise the use of that capital source, not do it on behalf of others.
Second, clearly distinguish the agency representing the owner and the representative of state capital in the enterprise to avoid confusion of functions.
“Currently, the State Capital Management Committee at Enterprises is the agency representing the owner, responsible for assigning tasks to enterprises in which the State invests and checking whether the enterprise is using the regulations correctly, taking preventive measures, and taking measures to handle risks if they are found. That is the right of the agency representing the owner. The person assigned to represent the enterprise, that is, that individual, must be responsible for organizing business activities, using capital effectively to achieve the goals assigned by the agency representing the owner. Article 11 of the Draft is confusing,” Mr. Cuong commented.
Regarding personnel decisions, stipulated in Article 13 of the Draft, Mr. Cuong said that it is necessary to follow the principle that the State ownership representative agency will be responsible for appointing a representative at the enterprise. This representative has the right to seek personnel to perform the assigned tasks.
“If the State owner representative finds the wrong person and does not meet the job requirements, the State owner representative will suffer the consequences. But when they have appointed a representative at the enterprise but have not given them any authority, how can they run the apparatus?”, Mr. Cuong raised the question.
Therefore, he proposed that that power should be given to the representative of state capital in the enterprise and they will exercise that power according to agreed principles, for example, what are the standards for recruiting a CEO, what regulations must be ensured, etc.
Similarly, Mr. Cuong proposed to clarify the responsibility for deciding on business strategies and plans, which are currently stipulated in Article 14 of the Draft. His point of view is that the strategy of that enterprise must be decided by the State, because when establishing a state-owned enterprise, the question of what it is for must be answered; how to implement that strategy, specifically the export and business plan, is the right of the enterprise.
The State ownership representative agency is responsible for assigning a number of planning targets, for example the goal is to preserve capital, but how to preserve it, keep it the same or increase it by what percentage; or how to understand the implementation of State-oriented tasks, depending on the specialized industries, there are separate targets...
In particular, Mr. Cuong said that the delegation of authority to enterprises must be consistent. Article 12 stipulates that enterprises decide on their own salaries, but when distributing profits, it stipulates that only a maximum of 3 months can be deducted for the salary and bonus fund.
“A profitable business only pays for 3 months, while a poor business also pays for 3 months, so it is the same and there is no difference. Therefore, I propose that profits be distributed after fulfilling obligations and setting up a development investment fund, and that businesses have the autonomy to plan salary payments,” Mr. Cuong proposed.
Similarly, Mr. Cuong proposed to hand over investment rights to enterprises when using development investment capital of state-owned enterprises, and not apply the same process as investment from the budget.
“Enterprises must be the ones to make decisions, but they must report to the owner’s representative agency about investment plans. This agency will evaluate and inspect, and if it finds risks, it will blow the whistle…”, Mr. Cuong clarified.
Sharing many of Mr. Cuong's opinions, Mr. An also admitted that it would not be easy to implement without major changes, such as personnel plans. "This method will certainly be very difficult, because the process and procedures for appointing and handling an official in a state-owned enterprise are no different from those for state management agencies."
In particular, Mr. An has not clearly seen the mechanism for state-owned enterprises to play a pioneering role in paving the way for implementation, still thinking that state-owned enterprises only need to achieve normal profit targets.
“We need to discuss deeply to determine the mechanism for state-owned enterprises to truly take the lead and pave the way, especially in the current period. Otherwise, it will be difficult to have enterprises that can solve big problems, so that the country can develop and enter modern industry,” Mr. An proposed.
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| Delegate Phan Duc Hieu, Thai Binh delegation, spoke at Group 10 during the discussion session on the Draft Law on Management and Investment of State Capital in Enterprises. |
Speaking at Group 10, delegate Phan Duc Hieu, Thai Binh delegation, suggested reviewing and redesigning the structure of the draft law.
Accordingly, the draft law needs to adhere to three main principles, specifically: not to re-regulate contents that have been stipulated in other laws; to build on the principle that enterprises are allowed to do what the law does not prohibit and to correctly determine the scope of the law, avoiding overlap and conflict with other laws in the legal system.
According to the delegate, many concepts in the law are unnecessary because they have been clearly defined in other specialized laws such as the Enterprise Law and the Securities Law. On the other hand, it is necessary to focus on providing clear and precise definitions of key concepts in the draft law such as “management of state capital in enterprises” and “state capital invested in enterprises”;…
In addition, Mr. Hieu suggested that the Law on Management and Investment of State Capital in Enterprises should only regulate the assignment and decentralization of responsibilities among state agencies in exercising the rights of owners, without going into the business activities of enterprises. In addition, clearly define the roles and tasks of the Government, the State Capital Management Committee and relevant ministries and branches; study and add a provision on the State Capital Management Committee, clearly defining the functions and tasks of this agency.
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