The restructuring process of state owned enterprises (SOEs) is expected to advance by leaps and bounds following a governmental decree concerning SOE establishment, re-organisation and dissolution released recently.
Some SOEs can look forward to having a greater say in their future
The decree stipulates that just 24 important sectors would be considered for SOE establishment henceforth.
These sectors include national power transmission system, cigarette production, lottery, printing press, explosives, poison chemicals supply and production, and publication.
Newly established SOEs would also be required to have a chartered capital of at least VND30 billion ($1.92 million) each, and large sized corporations at least VND500 billion ($32 million) each.
Nguyen Van Quang, deputy head of the Small and Medium Sized Enterprises Development Agency under the Ministry of Planning and Investment, said the government “has confirmed its determination in restructuring SOEs to enhance their competitiveness.”
He said the requirement of minimum chartered capital would be a pre-condition for SOEs to ensure adequate their financial capability as Vietnam prepares to integrate into WTO.
Previously, the minimum chartered capital of SOEs was VND20 billion ($1.28 million) which financial experts claim was an insufficient amount for SOEs to compete with foreign invested rivals, and even domestic private firms, under the context of integration.
According to the Ministry of Finance (MoF), the majority of current 4,000 SOEs were unable to satisfy the chartered capital requirements stated by the government last week, and even 24 out of current 90 state owned large sized corporations could not satisfy the capital requirement.
According to the SOEs reform plan approved by the government, about 1,300 SOEs will remain unchanged by 2006 and this means they would have to be recapitalised to satisfy the minimum requirements of chartered capital.
An official from MoF, who preferred to remain unnamed, said the ministry was now calculating a sum that would compensate for the increasing demand of chartered capital for such SOEs but the cost was believed to amount to hundreds of millions of dollars.
Nguyen Duc Tang, deputy head of the Financial Department of Enterprises (FDE), said in addition, a new mechanism on SOE-financial management to be released soon would introduce more rights to corporate leadership.
“Specifically, for SOEs which have an executive board, the management board will be allowed to make decisions on investment projects which have capital amounting to 50 per cent of the total asset value of the enterprises,” he said.
“Directors of SOEs which don’t have the management board will be permitted to make decisions on investment projects which have capital amounting to 30 per cent of the total asset value of the enterprises,” he added.
“Projects which have the investment capital higher than the above-mentioned levels are required to seek approval from a representative agency of state ownership, the state capital management agency,” he said.
He said that owing to such regulations, SOEs themselves will have self-autonomy in decision making and will be able to face up to the challenges ahead.
Under the decree, SOEs which have been accruing losses for three consecutive years or have accumulated losses amounting to three quarters of the state capital assigned to the enterprises would be dissolved.