Barriers hinder state-owned enterprises' progress
VietNamNet introduces the second part of the talk with expert Pham Viet Muon about enterprise restructuring policy in the past 30 years.

Part 1: 

Why are investors not interested in purchasing shares of SOEs?




VietNamNet: Regarding the policy to restructure SOEs, we used to encourage SOEs to hire CEOs. Could you say something about this?


Chưa thoát khỏi vòng kim cô








Pham Viet Muon: I fully agree with this policy. The 3rd central conference used to discuss this. The Prime Minister assigned the Ministry of Home Affairs to implement it. We also advised to choose the Auto Manufacturing Corporation, the Electrical Equipment Corporations and several SOEs to pilot this policy. But we have not harvested sweet fruits from this because the current mechanism hinders SOEs from hiring CEOs, particularly foreigners.

It is difficult. Do the hired CEOs have the right to appoint or dismiss the deputies, chief accountants and some key officials? Or do they have to have the approval of the board of directors or others? It is very hard for them to complete their tasks under these circumstances.

In other countries, they have clear, transparent rules on hiring managers. The law allows hired people to make decisions and be responsible before the board of management for his or her decisions. Unfortunately in Vietnam, it still cannot be done.

I remember that the Vietnam Auto Manufacturing Corporation hired a CEO but after several months the two parted ways.

Without true power, no one would work for us.

VietNamNet: What is your biggest concern?

Pham Viet Muon: In this context it is unrealistic to confirm that we can equitize 432 State owned enterprises early because of the hindrances already mentioned.

If these barriers are not removed, then equitization will be sluggish.

We have determination, and we do it, but what we lack is trust.

Without trust how can we convince others to join hands with us and to invest in our SOEs?

But if you look back the past 30 years, and during that time, the neighboring countries moved faster than Vietnam. We are very far behind them. How can we make the state owned enterprise sector contribute more to the prosperity of the country?

We cannot make a reluctant comparison between our country and other countries because of different historical conditions and different customs in each country.

For example: Thailand wants a peaceful society but it is difficult for them to have it or Vietnam wants to reach Singapore’s development but it will be a very long time to go.

The thing we can do is to harmonize these elements and the ability we have, to learn from the lessons of other countries to find a development path in line with our own. That thing cannot be done “overnight".

VietNamNet: At public forums and on social networks, many experts and researchers came up with proposals and suggestions for policy makers in the equitisation and restructuring of SOEs, but it seems that these initiatives, the suggestions have not been used. 


Chưa thoát khỏi vòng kim cô




Pham Viet Muon: Sharing information and making comments at forums is very good and highly recommended. But to turn words into action is a long way, affected by many factors.

When I was the Director of the Institute for Industry Policy and Strategy, I wrote a lot and also talked a lot. A minister once asked me why I wrote so much. I joked, "You pay me based on my letters and pages so I have to write long to earn more money." But more words do not mean more meaning. Sometimes you write a lot and talk a lot but the meaning is not much. 

But when I worked at the government office, I did the opposite. I wrote less and spoke less but I had to work more because there I needed more meaning, not words as before.

Usually when a new policy, a new mechanism is enacted, there are always opposite and supportive opinions. Or when ministries make policy, they also sought to benefit themselves first.

So many comments were complimented to be good, but if they impede the benefits of ministries, then they would seek to ignore them.

VietNamNet: Why can some other countries overcome this but we cannot?

Pham Viet Muon: I guarantee that even the American presidents when selecting their crews have to choose the people that understand and can help them in the assigned term. They will never choose someone who is always confrontational and does not serve their interests.

VietNamNet: Back to the issue of the performance of state owned enterprises. As you just said, our bottleneck is human resources. In the current mechanism, how can we deal with this obstacle?

Pham Viet Muon: We desire, we are determined to improve, but it is uneasy. The personnel task and task assignment in our country is always in the form of inheritance. The ones who are assigned to manage SOEs at present also inherit the legacy of the previous generations.

These people themselves, when they are young, were trained in and grew up in such an environment. There are many things rooted deeply inside their mind, habits and instincts.

Perhaps, in Vietnam the inspection and supervision systems are even more than in many other countries. We have social and political organizations ... but there are still wrong things in many state enterprises.

Even the handling of responsibility is a problem. Unfortunately, so far we have not handled based on the results, so many SOE officials make the same mistakes of their predecessors.

Therefore, in a changing society like this, if we do not have the people who devote themselves wholeheartedly to their job, who dares to do and take responsibility for their decisions. It is difficult to change SOEs.

VietNamNet: Why?

Pham Viet Muon: We handle responsibilities based on the cause rather than the result. In our mechanism, handling based on the cause is handling no one and no one is punished at all.

For example, in foreign countries, if a shipwreck occurs, the Transport Minister must take responsibility, and often he has to resign. It’s different from Vietnam because they handle the case based on the results of the work. Therefore the successors in these other countries understand why their predecessors were dismissed to avoid similar mistakes and to do better. 

I think we do not lack talent. Our matter is how to attract them, open opportunities and create motivation for them to participate and contribute to the country. This task is very difficult and it needs time.

VietNamNet: In addition to the matters associated with specific people, what other problems related to the mechanism on taking responsibility do we need to deal with so the equitization of state owned enterprises will be successful?

Pham Viet Muon: There are three things that if we can overcome, we will succeed and we will go more quickly.

Firstly, in terms of ideology: I have to affirm that until now, some officials still don’t thoroughly understand the role and position of state-owned enterprises in the state economy and the social economy.

Secondly, because of partial interests, policies have not been implemented thoroughly.

Although we have turned to the market economy model, but there are still many issues that we have to solve. For example, assessing the value of enterprises is very important when we issue shares. For years we did this task very rigidly, just thinking of our interests, not the attitude and the need of the market.


Chưa thoát khỏi vòng kim cô


Let’s imagine that we are housewives who go to the market every day to buy vegetables and fish. After negotiation, if both parties are satisfied with the prices, they are both happy. Or we go to the supermarket to buy goods. Supermarkets always list the prices of goods and if the buyer accepts the prices, he buys the goods or vice versa. If one does buy the goods, then others will the next day. After a long time, the supermarket can slash the prices. But there are goods for which they will never lower the price. They will destroy the products in order to keep the value.

But in our country, assessing the value of SOEs is inflexible. For example, the value of SOEs must not be lower than the book value as I said earlier.

Well, in our mechanism, if we cannot deal with the book value yet, then to make the buyer interested in our products, we should give them the opportunities to auction. No one purchases goods with higher prices than the market. We always consider it is a failure and do not sell shares of SOEs if the buyer offers lower prices than the price we have set. We always insist on high prices, so how can we sell our products?

This ultimate problem is that our thoughts are not really marketable, and we have not really integrated into the market economy.

Thirdly, personnel work. Undeniably, many officials have yet to meet job requirements, the ideological and cultural and social requirements... so when they directly handle specific tasks, it is often inefficient.

This is something that we have talked about a lot for a long time. We always blame the mechanism for everything wrong, but the mechanism is created by people, that is, us.

If our thinking is not open, then we cannot escape from the cage that we ourselves made.

So to make equitization a success, there is no other way but to have very high political determination, and to act in accordance with the laws of the market. 

To be continued…
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