Continuing renovation, improving effectiveness of operation of State-run enterprises, worthy of being as core of State economy, leading, creating motive force to build independent, autonomous economy of Vietnam in combination with international integration
Communist Review - In Vietnam, the State-run enterprises have always occupied the specially important position and role which have been affirmed theoretically and practically. However, to develop the independent and autonomous economy of Vietnam in combination with international integration, the continuity of renovation, further improvement of effectiveness of the operation of the State-run enterprises - the core force of the State-run economy - has become especially urgent.
The role of State-run enterprises in building the independent, autonomous economy of Vietnam in combination with international integration
In the context of globalization and the world situation with a lot of unpredictable upheavals like now, it affirms the capacities of independence and autonomy of the countries, so it demands that Vietnam needs to prepare its self-reliant internal strength in various aspects, in which there is the ensurance of the possibilities of independence and autonomy of the economy. It is the economy that is capable of having high adaptability to the changes of the international situation, with less damage before the disadvantageous changes, always ensures the maintenance of normal activities for the economic and social development and serves effectively the task of the national defence – security.
The documents of the 13th Party Congress has pointed out: “To maintain firmly independence and autonomy in determining the advocacies, lines and strategies for national economic development. To develop the Vietnamese enterprises to grow stronger to become the core of the country’s economy; to keep firmly the great balance, to pay attention to ensuring the economic security; to constantly enhance the potential of the national economy” (1). So, at the 13th Party Congress, the building of the independent and autonomous economy of Vietnam has been officially stressed as an important task to realize the aspiration of development of Vietnam in the new context, in which the guarantee of the great balance has become one of the measures to ensure the independence and autonomy of the economy. When the great balances are not to be ensured, the danger of dependence on or of being impacted by the external factors could cause the unpredictable consequences. That the great balances are regarded as a connotation of the measure to build the independent and autonomous economy has reflected the development in theoretical awareness of our Party in the Documents of the 13th Party Congress as compared to the previous congresses.
To have an independent and autonomous economy as advocated by the Party, one of the tasks of primary important breakthrough character is to rapidly remove the “bottlenecks” so as to help Vietnamese enterprises to spurt up and grow strongly, becoming the core of the economy. In which, the State-run enterprises have got an important mission, position and role to lead, create the motive force, pave the way for, give guidance to, attract and accelerate the enterprises of other economic sectors to together develop; to promote the linkage of value chain to increase; to carry out the policies on the economic development, social security, hunger eradication and poverty reduction, to directly preserve and develop the important resources of the country; to firmly maintain the governing position in various key sectors and fields of the economy, such as electricity, coal, basic chemicals, petrol, oil and gas, infrastructures of aviation, railroad and road. At the same time, the State-run enterprises need to take the lead in supporting and raising the competitiveness of the economy and of the Vietnamese enterprises area in general. The State-run enterprises in the new context, first of all, need to enter quickly the high-tech industries and the sectors being able to lead and transform the economic structure in the direction of modernization, industrialization, such as the digital infrastructure, modern precision mechanics, production, components manufacturing, machines and complete equipment for the production sectors; source technology, new materials, renewable energy, the space equipment industries, navigation, smart equipment and so on.
Along with the process of renewing the mindset, the development of the economy, of the enterprises of other economic sectors in the process of international integration, in each definite stage, the Party’s viewpoint of position and role of the state-un enterprises in the economy has become ever more perfect.
Right from the 6th Party Congress, the state-owned economy was affirmed: “to maintain the leading role, governing other economic sectors…., was proactive to expand its linkage with other economic sectors, direct these sector to the orbit of socialism” (2). This viewpoint continued to be affirmed by the Party in the Documents of the 7th Party Congress that the state-owned economy had held the key areas and sector so as to promote the leading role in the economy. Until the 8th Party Congress, on the basis of the results of the theoretical and practical review in the process of renovation, the term “the state-run economy” was used to substitute the concept of “the state-owned economy” with the new connotation. In terms of position, the state-run economy has been consisgtently determined by the Party as “to play the leading role”.
On the basis of summarizing the realities of activities of the state-run enterprises, the Resolution of the 3rd Plenum of the Party Central Committee of the Party’s 9th tenure, “On the continuity of arranging, renewing, developing and improving the effectiveness of the state-run enterprises” pointed out the role of the state-run enterprises: “to hold the key position in the economy, served as the important material tool for the State to orientate and regulate macro, acting as the core force, making the main contribution for the state-run economy to implement the leading role in the socialist-oriented market economy, as the main force in international integration” (3).
The 10th Party Congress had certain adjustments of the position of the state-run enterprises: “To eliminate monopoly and privilege in production and business of the state-run enerprises…, focus mainly on a number of areas of infrastructure, production of capital goods and important services of the economy, on a number of public interests” (4). The 11th Party Congress continued consistently this advocacy.
At the 12th Party Congress, the Party continued to stress and make clearer the role of the state-run enterprises, by focusing on the key, necessary areas; on the importance of the defence and security areas; on the areas that the enterprises of other economic sector did not make any investments. The Resolution No. 12-NQ/TW, on June 3, 2017, the 5th Plenum of the 12th Party tenure, “On the continuity of restructure, renovation and improvement of effectiveness of the state-run enterprises” had concretized the viewpoint of the 12th Party Congress, highlighted further the role of the state-run enterprises: “The state-run enterprises have held the key position and are the important material force of the state-owned economy, contributing to enhancing the economic development and carrying out the social progress and equality; the state-run enterprises have implemented the role of leading the development of enterprises of other economic sectors; ensuring that the Vietnamese enterprises have become the core force in the economic and social development, carrying out industrialization, modernization, building the independent and autonomous economy in the context of globalization and international integration” (5).
Inheriting the above-said viewpoints, the 13th Party Congress continued to stress: “The state-owned economy is the tool, important material force for the State to stabilize the macro economy, orientate, regulate and lead the promotion of the economic and social development, overcome the defects of the market mechanism…. The state-run enterprises have concentrated on the key areas, important areas, on defence and security; have operated in accordance with the market mechanism, carried out modern governance in accordance with the international standards; have taken the economic efficiency as the criteria for the main assessment, implemented equal competition with the enterprises of different economic sector” (6).
Institutionalizing the advocacies and viewpoints of the Party, the Government has promulgated a lot of policies on renovation, arranged and developed the state-run enterprises. Accordingly, the process of renovation, arrangement of the state-run enterprises has been carried out since the early years of the 1990s of the 20th century.
Generalizing the real state of activities of current state-run enterprises
Under the leadership of the Party, the resolute guidance of the Government, together with the efforts of the state-run enterprises, the privatization, arrangement and improvement of effectiveness of the activities of the state-run enterprises have now obtained a number of positive results:
Firstly, the number of the state-run enterprises has gradually progressed to the reasonability with the development requirement of the economy.
As of Decemger 31, 2020, the whole country had 646 enterpriese with the State having held 50% of charter capital, including: 459 enterprises whose 100% charter capital was held by the State, in which there were 6 economic groups, 52 state-owned corporations, 15 single-member limited liability companies operating according to the model of the parent company – the subsidiary company and 386 independent single-member limited liability companies, 187 enterprises whose 50% charter capital was held by the State, in which there were 3 economic groups, 15 corporations, 2 joint stock companies operating in accordance with the parent company – the subsidiary company model and 167 independent companies (162 joint stock companies and 5 companies operating with the 2-member limited liability companies model) (7).
So, in terms of quantity, with a lot of efforts in renovation, arrangement, restructure, the number of the state-run enterprises has reduced sharply, the areas and fields of operation have also been narrowed as compared to the past. However, the point that needs being stressed is that even though there is a sharp decrease in quantity, the operation of the state-run enterprises, not because of that, has been reduced along with it; on the contrary, they are operating in the streamlined and effective direction.
Secondly, as far as the overall is concerned, the results in production and business are worth being acknowledged.
As of the end of 2020, the total number of assets of the whole state-run enterprises is valued at VND 3,573, 689 billion, an 1% increase over that in 2019. The proportion of fixed property on average has occupied 36% of the total property. Equity is put at VND 1,680,303 billion, a 1% increase over that in 2019. The total value of the state capital being invested in the state-run enterprises stands at VND 1,573,471 billion, a 2% increase over that in 2019.
Especially, as for 19 groups and corporations under the Committee’s management, in recent time, even though in the context of being heavily affected by the COVID-19 pandemic, these groups and corporation have still maintained without let-up their production and business activities and obtained the recognizable results. The general results in production and business in 2021 of these 19 groups and corporation are: The total revenue has reached 99% of the plan (VND 821,295 billion, equivalent of 108% as compared to that in 2020; the total pre-tax profit has surpassed 70% of the plan (VND 34,179 billion, equalling to 93% over that in 2020). In which 13/19 groups and corporations have completed and overpassed the plan on revenue; 14/19 groups and corporations have completed and overpassed the plan on budget payment; 4 groups and corporations have paid the budget higher than the plan and that in 2020.
A lot of the large-scale investment projects, creating the important premises for the boost to the economic and social development of the whole country have been implemend, such as the Expanded Hoa Binh Hydroelectric Power Plant, the Expanded Ialy Hydroelecric Power Plant, the Quang Trach I Thermal Power Plant, the Long Thanh International Airport, the Tan Son Nhat Airport Terminal T3, the Cat Bi Airport Terminal 2, the Expanded Dien Bien Airport, the Vietnam Posts and Telecommunications Group (VNPT) and the Vietnam Mobile Telecom Services Company (MobiFone) have invested in 6,061 4G stations and 3,675 telecommunication and information technology infrastructures.
The importance and the results, the great contributions of the state-run enterprises for the economic and social development of the country are undeniable. It is reflected in the following aspects:
Firstly, the state-run enterprises have undertaken the role of being the important force of the economy, contributing to regulating and stabilizing the macroeconomics, ensuring the great balance of the economy and boosting the economic and social development.
Secondly, the state-run enterprises have played the core, leading role of some key sectors and areas of the economy such as finance-banking, oil and gas, electricity, coal, mineral mining, basic chemicals, telecommunications, the digital transformation platform, communications and transport, petrol, oild, food supply, both have ensured the foundation in service of the acvities of production and business of the enterprises and other economic sectors and have met the consumer requirements of the people and the export.
Thirdly, in 2020, the state-run enterprises had together with the whole country prevented and combated effectively against the COVID-19 pandemic, carried out the tasks to help the compatriots from the epidemic regions in the world, supplied chemicals, materials, equipment to prevent the epidemic; especially they had exempted and reduced the fees, service charges and products to stabilize the market, support the people’s life and the operation of the enteroprises of different economic sector with the total value reaching VND 24,000 billion. The state-run enterprises were also the leading units to carry out the social security as advocated by the Party and the State. In the past 5 years, the total funding to support the implementation of the social security programs, the programs to support the rapid and sustainable poverty reduction has reached VND 9,000 billion; at the same time, they have also supported directly 54 out of 62 poor districts nationwide.
The data in Table 1 show that in terms of labour use, the state-run enterprises area has got the highest efficiency of 18.9 times, while the non-state enterprises have reached 17 times and the FDI enterpises, 13 times; the highest debt index is 3.6 times, the other areas, it is 0.6 times and 1 time respectively. The profitable efficiency in the state-run enterprise area is higher than the non-state enterprises, but lower than the FDI enterprises. In general, as compared to the expectations, the production and business effectiveness of the state-run enterprises is yet to be on a par with the potential and the resources, but they have definite prospect.
As compared to the non-state enterprises and the FDI enterprises, the quality and effectiveness of the state-run enterprises’ activities are still low. In other words, the state-run enterprises have to use much more capital to create one output product value and this is the factor to reduce the investment effectiveness of the state-run enterprises.
In recent time, the state-run enterprises have been arranged and renewed in the direction of being gradually narrowed in many positions that do not need the presence of the state-run enterprises, including their operation field (the sector scope with the state-run enterprises) and the density of their presence (the number of the state-run enterprises that do business with other sectors). Therefore, the number of the state-run enterprises has been decreased charply together with the implementation of the restructure, equitization and the divestment in these enterprises. As of 2020, even though the state-run enterprises only occupied about 0.08% of the number of enterprises in operation, the state-run enterprises had still held a lot of important resources of the economy, occupying 25.78% of the total capital of the whole area of enterprises. The state-run enterprises had attracted 1.1 million labourers, occupying 7.4% labour of the whole enterprise area. However, the state budget payment of the state-run enterprises was reduced in the past year, but they are still the important and stable revenue source for the state budget.
Apart from the recorded results, the state-run enterprises have still got a lot of limitation and weaknesses, such as the operation and competitiveness are still limited and not yet on a par with the resources they have held. Even though, abou 60% of social resources have now been concentrated in the state-run enterprises, but this area has only contributed about 40% of GDP, and the remainder of GDP is the contribution from the private and FDI enterprises. So, the state-run enterprises have still used the capital ineffectively.
The state-run enterprises are yet to reflect their outstanding role in leading, in creating the motive force to motivate other economic sectors to develop. The state-run enterprises are yet to be really strong in the sectors and fields that have the influence to decide the support to raise the competitiveness of the economy and of the Vietnamese enterprises.
These limitations were pointed out by the 13th Party Congress: “Many state-run enterprises are slow in implementing the restructure and in renewing the machenisms of governance; the divestment and equitization have still faced with a number of impediments in both the institution and organization of implementation; the effectiveness of production and business is still low; the state of debt, loss and profligacy is still great” (10).
Continue renovation, improve effectiveness of operation of state-run enterprises in the spirit of 13th Party Congress
The 13th Congress of the Communist Party of Vietnam has put forth its guiding viewpoint in order to continue to improve the effectiveness of the operation of the state-run enterprises: “To enhance the treatment of debts, divestment, equitization, restructure of state-run enterprises; to speed up the renovation, raise the level of technology, apply the modern management of governing enterprises so as to improve the effectiveness, at the same time carry out the close inspection and supervision of the operation of enterporises without making losses, wastefulness of state capital and property” (11). To implement this viewpoint, there are some solutions as follows:
Firstly, to speed up the restructure of state-run enterprises.
To continue the perfection of mechanism and policy to enhance the process of restructurinmg the state-run enterprises; to perfect the mechanism of using the revenue source from the transfer of the ownership of enterprises, the public non-business units and the transfer of state capital; to renew the mechanism of supervising finance, evaluate the effectiveness of operation of the economic groups, state-owned corporations, the state-run enterprises; to study on a trial basis the transfer of a number of the economic groups and state-owned corporations whose 100% charter capital has been held by the State to the operation in the form of the joint stock enterprises with the shareholders being the state economic organizations, state-run enterorkses with the function of making investment and doing business with the state capital.
To promote the treatment of debts, divestment, equitization of the state-run enterprises in an effective, open and transparent manner; there is the mechanism of supervising, discovering and treating in time the violations in the process of implementation. To enhance the inspection, supervision of the process of using capital in the state-run enterprises. To treat definitely the projects having losses, operating ineffectively in the principle of openness and transparency, in accordance with the market mechanism and the stipulations of the law. The State will not invest and add capital from the state budget in the projects with losses and ineffectiveness. The treatment in the form of dissolution, bankruptcy has to ensure the highest benefits of the State, the lelgitimate interests of the labourers and the investors.
To accelerate the decentralization and proxy for the member council, the board of directors of the economic groups and state-owned corporations, at the same time, to enhance the operation of inspection and supervision of the agencies representing the proprietors so as to prevent, discover and treat in time the violations according to the law.
Secondly, to improve effectiveness of operation and competitiveness of state-run enterprises.
To apply the modern technological plaform, the abilities of innovation and governance in accordance with the international standards so as to improve the effectivenss of operation and competitiveness of the state-run enterprises. To have the mechanism to encourage the research, development and application of advanced science and technology to the activities in production, business and management, supervision of enterprises. To carry out the digital transformation, to intensify in an open and transparent way the financial information, to enhance the accountabilities of enterprises. To develop a number of the large-scale state-owned economic groups which are operating effectively with competitiveness in the region and the world in some key sectors and areas of the economy.
Thirdly, to renew, improve effectiveness of operation of the model of agencies representing the state proprietor for state-run enterprises and state capital at enterprises.
To consolidate and perfect the model of the Committee so as to promote the role of managing state capital invested in enterprises.
Fourthly, to build the model of modern enterprise governance.
The improvement of awareness, renewal of governance according to the general standards of the world have to be combined with the goal of improving effectiveness of handing over the financial autonomy, the self-responsibility to state-run enterprises so as to ensure the competition, equality and integration when the state-run enterprises join the market.
Apart from that, it is necessary to split two factors of ownership and governance, because the effectiveness of operation of enterprises is not dependent on the factor of ownership, but on the factor of governance in enterprises. If the governance is poor, then effectiveness is low. As for the factor of ownership, the problem here is that it is necessary to deermine clearly the content of supervision of the State, the State’s role of management and the role of the proprietor as well as the role of proprietor with the right of decision in business. To combine the results in arranging, renewing and improving the effectiveness of the state-run enterprises with the assessment of the responsibility of the chief. The cadre work, the salary and reward policy of the state-run enterprises have to be associated with the effectiveness of operation of the state-run enterprises in accordance with the market mechanism.
At the same time, it is necessary to have the mechanism to supervise closely the responsibility of the chiefs of the state-run enterprises. Besides, it is necessary to promulgate the set of criteria to judge the effectiveness of operation of each form of state-run enterprises as mapped out in the goal. When there is this set of criteria, the effectiveness of operation of each form of the state-run enterrises will be known.
Fifthly, to separate the business operation from the operation of public interests.
In the market economy, the separation between the activities of public interests of the State and the business operation is the objective requirement. In principle, enterprises in business operation with the goal that it has to optimize profits, the public interest enterprises have got the goal of optimizing the social interests. If there is a separation, then all activities of the enterprises will be transparent, and the assessment of results and the effectiveness of operation of the enterprises can be precise. If the enterprises are allowed to both do business and to bear the social role, then it will lead to either fail to implement the goal of profits or will not play well the social role. This lack of tranparency will be made use of by the state-run enterprises to justify their ineffecrive business operation, because they have to implement the social goals. That is why, it is better to let the public interest enterprises carry out the special goals, whereas the business enterprises have to complete their business activities with good business effectiveness and this has to be placed in the condition of being on an equal footing with other forms of business.
Sixthly, to boost the digital transformation in the state-run enterprises.
To carry out the national digital transformation, to develop the digital economy, to improve productivity, quality, effectiveness, competitiveness of the economy is one of 6 important tasks of the country, already determined in the Resolution of the 13th Party Congress. The capable and responsible state-run enterorises are in the lead in the digital transformation, at the same time, they ensure their role of leading the sustainable development of the enterorises and contribute to spreading the successful implementation of the national digital transformation.
Seventhly, to improve capacities, qualities of the contingent of managerial cadres at the state-run enterrises.
To perfect the system of the economic encouragement and leverage along with the enhancement of responsibility, discipline and order in the state-run enterprises. To carry out extensively the recruiting mechanism through the open and transparent competitive examinations for all the titles of management, administration and other positions in the enterprises. To ensure the openness, transparency of the state-run enterprises and the accountabilities of the enterprise managers, especially in finance, investment, procurement and use of the state capital, the expenditues, business results, profit distribution, the personnel work, the great transactions, assets and income of the managers of the enterprises./.
(1) The documents of the 13th Party Congress, the Truth National Political Publishing House, Hanoi, 2021, tomb I, p. 135
(2) The Party Documents: Complete works, the Truth National Political Publishing House , Hanoi, 2006, tomb 47, p. 392
(3) The Party documents: Complete works, Ibid, 2016, tomb 60, p. 602
(4) The Party documents: Complete works, Ibid, 2018, tomb 65, p. 189
(5) The Resolution No. 12-NQ/TW, on June 3, 2017, the 5th Plenum, the 12th Party tenure, “On the continuity of restructure, renovation and improvement of the effectiveness of the state-run enterprises”
(6) The documents of the 13th Party Congress, Ibid, tomb I, p. 129
(7) From the Report No. 399/BC-CP, on October 12, 2021 of the Government “On the activities of investment, management, the use of state capital at the enterprises in the nationwide scope in 2020”
(8) The Ministry of Planning and Investment: The White Book of Vietnamese enterprises in 2021
(9) Vu Van Ha: “To build, promote the role of the state-run enterprises in the current conditions”, the Electronic Communist Review, on December 25, 2020, https://www.tapchicongsan.org.vn/web/guest/kinhte/-2018/820756/xaydung%2C-phat-huy-vai-tro-cua-doanh-nghiep-nha-nươc-trong-dieu-kien-hien-nay-aspx
(10), (11) The Documents of the 13th Party Congress, Ibid, tomb I, p. 81, 133-134
This article was published in the Communist Review No. 998 (November 2022)