Effective model needed for state capital management

business May 16, 2017 01:00


VIETNAM urgently needs an effective model for managing State capital at State-owned enterprises (SOEs) to prevent loss and corruption while promoting efficiency in using State capital.

Party General Secretary Nguyn Ph Tng, at the fifth plenary meeting of the 12th Communist Party of the Vietnam Central Committee, said it was necessary to complete the model of managing State assets and capital at enterprises. Further, by 2018 at the latest, a specialised agency to represent State ownership was required to be formed.

Statistics of the Ministry of Finance revealed that State capital at SOEs is estimated to be 1.3 quadrillion dongs (US$57 billion) – a large sum, but stories about huge loss-making projects and failure in clarifying accountability were ringing alarming bells.

The separation of State capital ownership and management functions was, despite being an extremely hard job, undeniably essential. The foundation of the State Capital Investment Corporation (SCIC) marked a change not only in thinking but also in the management mechanism.

However, SCIC, after 10 year in operation, had managed only 1 per cent of the total State capital at enterprises while the rest were under the management of ministries and local authorities - a decentralised management model - which made it difficult to transfer State capital to SCIC.

Two State capital management models were being discussed - a committee and an enterprise.

The former would be a specialised committee under the Government while the later would be an SOE upgraded by SCIC that would be in charge of managing State capital at enterprises.

Both would meet the need of separating ownership from management and have their own certain strengths and weaknesses; therefore careful consideration was needed to determine which was more suitable.

According to Nguyn Cung, director of the Central Institute for Economic Management, any model must minimise administrative intervention in managing and using State assets to prevent the long-term and strategic target of State investment from being distorted.

Cung said a committee under the Government would have stronger legal status than an enterprise but less impetus for efficiency and accountability.

Weak legal status would make it difficult to transfer State capital from other SOEs, Cung said.