This chapter assesses Vietnamese Government’s role as an owner against the Chapter II of the SOE Guidelines. It examines to what extent the state ownership function is organised in a transparent and accountable manner. It also looks at how the state exercises its ownership rights according to the legal structure of each enterprise.
OECD Review of the Corporate Governance of State-Owned Enterprises in Viet Nam
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Corporate Governance
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8. The State’s role as an owner
Abstract
Overarching recommendation from the SOE Guidelines
The state should act as an informed and active owner, ensuring that the governance of SOEs is carried out in a transparent and accountable manner, with a high degree of professionalism and effectiveness
8.1. Simplification of operational practices and legal form
A. Governments should simplify and standardise the legal forms under which SOEs operate. Their operational practices should follow commonly accepted corporate norms
SOEs can operate in the form of a limited liability company or a joint stock company. The current Law on Enterprises does not prescribe other legal forms for enterprises of other economic actors. Private companies (without state capital) reserve the right to operate under these models, so the law does not allow SOEs to operate under any exclusive model different from other companies (see Box 8.1).
Box 8.1. Legal forms under which SOEs operate
Article 88 of the 2020 Law on Enterprises states that state‑owned enterprises shall be limited liability companies or joint stock companies, including:
State‑owned enterprises shall be limited liability companies or joint stock companies, including:
a) Wholly state‑owned enterprises (100% of charter capital of which is held by the State)
b) SOEs where the State holds over 50% of charter capital or voting shares, except those prescribed in point a) above.
Wholly state‑owned enterprises specified in point a Clause 1 of this Article include:
a) Single‑member limited liability companies 100% of charter capital of which is held by the State that are parent companies of state‑owned corporations or parent companies in groups of parent company – subsidiary companies
b) Independent single‑member limited liability companies 100% of charter capital of which is held by the State.
SOEs where the State holds over 50% of charter capital or voting shares prescribed in point a clause 1, including:
a) Multiple‑member limited liability companies and joint stock companies over 50% of charter capital or voting shares of which is held by the State that are parent companies of state‑owned corporations or parent companies in groups of parent company – subsidiary companies
b) Independent multiple‑member limited liability companies and joint stock companies over 50% of charter capital or voting shares of which is held by the State.
Source: 2020 Law on Enterprises, Vietnamese Law Portal, https://thuvienphapluat.vn/
Fundamentally, principles for the management of SOEs are no different from those of private companies and listed companies. In terms of organisation and operation, SOEs have to fully comply with provisions of law like other enterprises. However, in terms of management and use of state capital, SOEs have to comply with other relevant regulations. At present, Vietnamese law does not grant any exclusive rights to or unique legal status SOEs in a way that protects them, in part or in whole, from insolvency or bankruptcy. However, in practice, regarding industry-leading SOEs, government extends preferential access to government guarantees and loans to them, with a view that their bankruptcy would lead to the instability of their entire respective industry and the economy as a whole. OECD mission team is informed that it is not uncommon for some SOEs to “ask for help” from the government and/or receive support and interventions from the government. Most recently, Vietnamese Airlines received government support to tackle financial difficulties posed by the COVID‑19 pandemic.
An important measure in ensuring competitive neutrality will be to avoiding bailing out lagging SOEs with state aid and putting an end to government guarantees on debt issued by SOEs. While explicit government guarantees are being disclosed thanks to a statutory ceiling that is imposed on public debt (60% of GDP for 2021‑25), the government could consider disclosing contingent liabilities to state‑owned enterprises (OECD, 2022[1]).
In theory, structure and composition of the Members’ Council/Board of Directors (BOD) should depend on the proportion of shares shareholders hold in enterprises. However, in SOEs, the State is often the only shareholder or majority shareholder who reserves the right to assign all or the majority of members in the Members’ Council and BOD.
Regarding labour relations, SOEs and non-SOEs must comply with provisions of the Labour Code. In principle, the legal forms of SOEs do not provide for different treatment of employees (e.g. remuneration, pension rights and job protection) compared with other types of companies. Benefits of employees in SOEs are delivered per regulations of the government and sectoral ministries while other enterprises must implement labour policies per their commitments and agreements with employees and provisions of the Labour Code.
The government has issued a number of regulations on wages and bonuses for employees and managers of of SOEs. These include Decree No. 51/2016/ND-CP on labour management and wages and bonuses for workers of one‑member limited companies where the State holds 100% of charter capital; Decree No. 52/2016/ND-CP on wages, remunerations, and bonuses for managers of one‑member limited companies where the State holds 100% of charter capital; and Decree No. 53/2016/ND-CP on labour, wages, remunerations, and bonuses at joint stock companies where the State has a controlling interest.
8.2. Political intervention and operational autonomy
B. The government should allow SOEs full operational autonomy to achieve their defined objectives and refrain from intervening in SOE management. The government as a shareholder should avoid redefining SOE objectives in a non-transparent manner
Provisions of law on rights and obligations of the owner’s representative serve as a measure to prevent the Government’s intervention in SOEs’ day-to-day management. Legal documents also specify the Government’s rights and obligations to SOEs; and rights of SOEs in day-to-day business activities. Article 5 of the Law No. 69/2014/QH1335 clearly sets out that the state body exercising ownership rights and the regulatory bodies shall not interfere with day-to-day operations and business decisions of an SOE.
However, it is not clear if there are any safeguards in place to prevent the government from intervening in the day-to-day management of SOEs and if they are subject to any public disclosure requirements in such cases. Furthermore, the scope of supervision of the representative agency of state‑owned assets is not clearly delineated and overlap with monitoring and financial control activities of the Ministry of Finance whose supervisory role extends to making decisions on investment activities, remuneration schemes, financial statements and dividends of SOEs. The responsibilities of the line ministries vis-à-vis SOEs are not clearly defined by the Law.
In relevant decrees (Decree No. 131/2018/ND-CP, Decree No. 10/2019/ND-CP) specific provisions are prescribed on the competence and responsibilities of various levels: the owner’s representative agency, the Members’ Council, the General Meeting of Shareholders, the Board of Directors (BOD), the Chairperson of the Members’ Council, and the General Director. At the same time, these documents prescribe cases and areas that the Members’ Council can decide, areas and cases that require consultation with the owner’s representative agency, and areas and cases that the owner’s representative agency can decide. Article 9 of Decree No. 10/2019/ND-CP sets out rights and responsibilities of the owner’s representative agency regarding the charter, strategy and plan of a wholly state‑owned enterprise as follows:
a) The owner’s representative agency shall adopt the charter and the revised or amended one of the enterprises upon the request of the Board of Members and the enterprise’s Chairman, except the cases in which the authority to adopt the charter is delegated to the government.
b) The owner’s representative agency shall approve that charter so that the Board of Members and the enterprise’s Chairman can decide the 5‑year plan (including the business strategy and plan and 5‑year investment and development plan) and the annual business plan of the enterprise, except the cases in which the authority to grant approval is delegated to the Prime Minister.
c) The decision on approval of plans specified in Clause 2 of this Article must contain the following main information:
i. Planned objectives and tasks
ii. Indices measuring revenues, profits, payments to the state budget and other plan-related indices
iii. Plan implementation solutions
iv. Assignment of tasks of implementation, supervision and assessment of results of implementation of these plans
v. Others.
OECD team finds that there is no full operational autonomy of SOEs in their decision making. In Viet Nam, the ownership entities play a more direct role in strategic management of SOEs, as well as in the appointment of the CEO and succession planning and executive remuneration and incentive schemes. According to good practice, most of these responsibilities should be exercised by the board.
To begin with the responsibilities of BoMs of wholly state‑owned enterprises are not clearly delineated from those of the General Director nor from the state owner. At the same time, BoM consists of representatives of state capital. While the government does not directly provide directions to managers of SOEs, it often provides directions via the owner’s representative agency to them with respect to formulation and implementation of production and business plans. Government’s ownership entities (including ministries, agencies and CMSC) communicate commercial policies, strategies, regulations on SOEs’ business activities to Members’ Council/Chairperson/Representative of state capital at SOEs/SOE boards on a regular basis.
For instance, when an SOE wishes to invest in an infrastructure project, it often has to consult a number of stakeholders including MPI and MOF before reaching any conclusion. However, since these ministries are not professional investors, it often takes a lot of time for them to come up with a decision. At the same time, the government may appoint SOEs to perform special tasks in the field of national defence and security, etc. or to perform tasks that private enterprises do not have the conditions and resources to implement.
As per Article 5 on implementation of rights and responsibilities of the Government of Decree No. 10/2019/ND-CP, CMSC shall have the right to request competent regulatory authorities to appeal to the government to: promulgate, amend and supplement the statutes of wholly state‑owned enterprises that are established under the Prime Minister’s decisions and of which management is authorised to the Commission in accordance with the Government’s regulations; promulgate, amend and supplement financial management regulations of the Vietnam National Oil and Gas Group, and the Vietnam Electricity Corporation.
It is also notable that Decree No. 87/2015‑ND-CP on supervision of government capital enables the Ministry of Finance to perform a supervisory role with regard to investment activities, remuneration schemes, SOEs’ financial statements and dividends policy.
Currently, SOEs’ disclosure is mandated by 2020 Law on Enterprises (Articles 109 and 110) and its subsequent Decree No. 47/2021/ND-CP dated 1 April 2021 of the government. Furthermore, SOEs that are registered as publicly-traded joint stock companies must comply with disclosure procedures per provisions of Law on Securities.
All commercial policies and strategies are widely announced by state management agencies, representative agencies of state capital owners to enterprises, Members’ Councils and Boards of Directors of SOEs and enterprises with state‑contributed capital through documents, their websites, press releases, except for contents prescribed by competent authorities as state secrets. However, such information is not presented in an aggregate manner on these websites.
8.3. Independence of boards
C. The state should let SOE boards exercise their responsibilities and should respect their independence
SOE boards’ degree of responsibility and autonomy to define – in accordance with the objectives defined by the government – strategies for the company. Processes through which government or its ownership unit set objectives and communicate them to SOE boards.
SOE strategies are usually defined over a five‑year period (e.g., 2021‑25). The approval process for strategies of SOEs is spelled out in the 2014 Law 69 on Management and Utilisation of State Capital and Decree No. 10/2019/ND-CP dated 30 January 2019 by the government, as follows:
Enterprises with 100% state capital established by decision of the Prime Minister: the Prime Minister approves the strategy.
Enterprises with 100% state capital established by the owner’s representative agency: The owner’s representative agency approves the strategy for the Board of Directors and the company’s president to decide.
Enterprises held by the State with 36% or more: The representative of the state capital portion in the enterprise shall report and seek opinions from the owner’s representative agency before giving opinions, voting and deciding on the State capital at the General Meeting of Shareholders, the meeting of the Board of Directors, the Members’ Council in accordance with the law and the charter of the enterprise.
The formulation of the enterprise’s strategy is based on the orientations of the Party, the State and the government, general socio‑economic development strategy of the whole country, as well as the national planning of sectors and fields related to enterprises. The strategy of SOEs is completed and approved by the competent authority only after the general socio‑economic development strategy of the whole country is approved. The Board of Members and the Board of Directors of the enterprise are responsible for taking into account these contents when formulating the strategy of the enterprise.
At present, the Member’s Council/BOD has yet to be given full responsibility and autonomy in the development of SOEs’ strategies. To become a member of an SOE’s BOD, one must be nominated by shareholders (the owner’s representative agency) and elected by the general meeting of shareholders (GMS). In the case of a wholly state‑owned company, the Chairperson and members of the Members’ Council of the company are appointed by the owner’s representative agency.
The responsibility and authority of the representative of the state capital in a joint-stock enterprise are specified in the 2014 Law 69 on Management and Use of State Capital, 2020 Law on Enterprises, Decree No. 10/2019/ND-CP dated 30 January 2019 of the government and other relevant normative legal documents. Accordingly, a BOD member authorised to be a representative of state capital share by the owner’s representative agency must fulfil his/her rights and responsibilities under the guidance of the owner’s representative agency, and report fully to the owner’s representative agency on a case by case basis as prescribed. Prior to voting at the Board of Directors, a representative of the state capital portion must consult the opinion of the owner’s representative agency on the voting content (see Box 8.2).
SOEs develop and suggest strategic development contents and submit them to competent authorities for approval. The Boards of Directors (BOD) of SOEs develop the directions of development for their SOEs in line with the development goals set by the government. SOEs’ directions of development are adopted at general meetings of shareholders. The owner’s representative agencies direct the representatives of state capital at SOEs to pass the directions of development at general meetings of shareholders. Assessment on board autonomy is extensively covered in the Chapter 13 on Responsibilities of Boards of Directors.
Box 8.2. Rights and responsibilities of the representative of state capital share in the 2014 Law on State Capital Management
Article 48. Rights and responsibilities of the representative of state capital share
Ask for the advice from the owner’s representative agency before raising opinions, casting votes and making decision at the Shareholders’ General Council, meeting of the Board of Directors, Board of Members, on the following issues:
Scope of businesses, objectives, tasks, strategy and plan for investment and development, and plan for production and business.
Introduction and revision of the charter; increase or reduction in the charter capital; election, dismissal, discharge, commendation, reward and penalties for members of the Board of Directors, Board of Members, General Director or Director, Deputy Director General or Vice Director.
Distribution of profits and setting up of annual funds in the enterprise.
Reorganization, dissolution or bankruptcy.
a) Other issues managed under the delegated authority of the Shareholders’ General Council, Board of Directors and Board of Members.
Make on-time reports on any loss incurred by joint-stock companies or multiple‑member limited liability companies during their operations, failure to ensure payment competence, to complete assigned tasks as well as other violations.
Submit the quarterly, annual and on-demand reports on manufacturing and business activities, financial status, and recommend solutions at the request of the owner’s representative agency and the representative of state capital share.
Request joint-stock companies and multiple‑member limited liability companies to pay in their distributable profits and dividends in proportion to the share of state capital invested in such companies to the State Budget.
Be deprived of the right to continue to act as the representative if that person does not fully exercise the delegated powers or assume the delegated responsibilities or does not meet the requirements for a representative anymore.
Bear legal responsibility for any violation causing any loss on or damage to the state capital.
Exercise the rights and assume the responsibilities in accordance with regulations laid down in the charter of joint-stock companies and multiple‑member limited liability companies, the enterprise law and other relevant laws.
Source: 2014 Law on State Capital Management, Submission from Vietnamese Government, Viet Nam Law Web Portal, https://thuvienphapluat.vn/
8.4. Centralisation of the ownership function
D. The exercise of ownership rights should be clearly identified within the state administration. The exercise of ownership rights should be centralised in a single ownership entity, or, if this is not possible, carried out by a co‑ordinating body. This “ownership entity” should have the capacity and competencies to effectively carry out its duties
According to the 2014 Law 69 on Management and Use of State Capital, “owner representative agency” means an agency or organisation assigned by the government to exercise rights and perform the duties of the representative of state ownership in the enterprise established under its decision, or to manage and accept the rights and assume the duties to a portion of the state capital invested in joint-stock companies and multiple‑member limited liability companies. Under this law, there is no limit to participation of public sector agencies in the ownership or performance management of the ownership function of SOEs.
Policy framework for state ownership function in Viet Nam has gradually improved in recent years. The government has established the Commission for the Management of State Capital at Enterprises (CMSC) to perform the function of representing state ownership in 19 state‑owned corporate groups and corporations (except for some specific fields such national defense, etc.). People’s Committees of provinces and cities perform the function of representing the ownership entity in enterprises in the localities.
At present, the Commission for the Management of State Capital at Enterprises (CMSC), SCIC, several Ministries, People’s Committees of Provinces and Cities perform the role of representing owners of state capital in SOEs (see Box 8.3). All representative agencies must comply with the provisions of Law 69 with respect to appointing boards and operational control. While there are many representative agencies as mentioned above, at each SOE, there is only one agency that represents the owner and is directly responsible for the said SOE. Legal regulations are regularly amended and supplemented to tackle difficulties and problems.
The CMSC was established by the government in 2018 to perform its role as the owner’s representative agency at 19 state‑owned groups and corporations which operate in various sectors of economy except in the fields of national defence, security, finance, monetary, and etc. CMSC exercises the rights and responsibilities of the owner at SOEs as prescribed in provisions of 2014 Law 69 on Management of State Capital, Decree No. 131/2018/ND-CP and Decree No. 10/2019/ND-CP. CMSC is also required to adhere to provisions of law on corporate financial management and corporate finance oversight regarding SOEs to which it is the owner’s representative. According to these provisions, when exercising its rights and performing its responsibilities to represent the owner, CMSC is mandated to co‑ordinate with other state management agencies with regard to financial supervision, business classification, review, appraisal of investment projects, loans, etc. CMSC and SOEs to which it is the owner’s representative must manage and utilise state capital in line with sectoral development strategies, plans, and policies approved by competent authorities. CMSC works with relevant agencies to commission or assign SOEs to undertake services of general interest or other socio‑economic missions as prescribed by law.
Box 8.3. Decree No. 10/2019/ND-CP on Implementing Rights and Responsibilities of State Owner’s Representatives
Chapter I, Article 4. Owner’s representative agency
The Committee for management of state capital at enterprises shall be the agency representing the owners of wholly state‑owned enterprises and the state capital invested in enterprises in accordance with the Government’s regulations.
Ministries, Ministry-level agencies, Governmental bodies (hereinafter referred to as ministry), People’s Committees of provinces and centrally-affiliated cities (hereinafter referred to as provincial People’s Committee) shall be the agency for owner’s representative to the followings:
a) Wholly state‑owned enterprises and state capital contribution portions invested in enterprises that are established under the decisions issued, or of which management is authorised, by ministries or provincial People’s Committees, and that are not transferred to the Committee for management of state capital at enterprises and the State Capital Investment Corporation in accordance with laws;
b) Wholly state‑owned enterprises and state capital contribution portions invested in enterprises that are transferred to the Committee for management of state capital at enterprises and the State Capital Investment Corporation during the period of pending transfer.
The State Capital Investment Corporation shall exercise the right of representation for the state owner at enterprises that are transferred from ministries or provincial People’s Committees in accordance with laws.
Source: Submission from Vietnamese Government, Vietnamese law portal website
State Capital Investment Corporation (SCIC) is an enterprise with the function of exercising the right to represent the owner of state capital in ministries and localities. Enterprises represented by CMSC and SCIC operate in a wide range of different fields, not fixed for certain sectors of the economy. Currently, the government is prioritising the acceleration of business transfer to SCIC.
8.5. Accountability of the ownership entity
E. The ownership entity should be held accountable to the relevant representative bodies and have clearly defined relationships with relevant public bodies, including the state supreme audit institutions
Ministries are responsible for formulating or promulgating within its scope of authority regulations and policies on management for all types of enterprises in society including SOEs and submitting them to the Prime Minister. With the above provisions, these ministries and state representative agencies, based on the Government’s request, must regularly report to the Government on SOEs’ implementation of financial and sectoral policies and make proposals, implement feasible solutions within their management areas to improve SOEs’ operational efficiency. For example, the Ministry of Finance develops policies and collects taxes from SOEs. The Ministry of Finance reports to the government and the National Assembly to adjust tax policies according to the requirements of 5‑year Socio-Economic Development strategy for each period.
The State Audit is a state agency under the management of the National Assembly. The State Audit Office has the power to inspect and audit the use of state budget funds for the activities of state ownership representative agencies including CMSC; examine and audit the use of state capital in production and business activities of enterprises represented by these agencies. As prescribed in the Article 9, 10 and 11 of 2015 Law on State Audit, the State Audit of Viet Nam provides its assessment, conclusion, and recommendation regarding the management and use of public funds and assets.
8.6. The state’s exercise of ownership rights
F. The state should act as an informed and active owner and should exercise its ownership rights according to the legal structure of each enterprise. Its prime responsibilities include:
F.1. Being represented at the general shareholders meetings and effectively exercising voting rights;
As per 2020 Law on Enterprises, the State as a shareholder at joint stock companies in principle shares the same rights and interests as other shareholders. According to the Law, the State should simply act as a shareholder, not a superior management authority. As a shareholder, the State is involved in business and human resources decisions made at enterprise level corresponding to the share of state capital in the charter capital of an SOE.
Based on regulations of the owner’s representative agency regarding rights and obligations of the representative of State capital at meetings of BOD and general meetings of shareholders, for SOEs that are joint-stock companies, the representative of the capital portion shall consult and seek approval from the representative agency of the owner (agency representing the State’s ownership) before voting at the general meeting of shareholders. The relevant order and procedures as well as operational modalities of Members’ Council of a wholly state‑owned company are specified in the 2014 Law 69 on Management and Utilisation of State Capital, 2020 Law on Enterprises, and other relevant normative legal documents. Specifically, work regimes, conditions, and procedures for conducting meetings of the Members’ Council of a wholly state‑owned company follow Article 98 of the 2020 Law on Enterprises.
F.2. [The state’s prime responsibilities include:] Establishing well-structured, merit-based and transparent board nomination processes in fully- or majority-owned SOEs, actively participating in the nomination of all SOEs’ boards and contributing to board diversity;
Policy framework for ensuring transparent and rigorous board nomination process is not yet in place. The procedure for nominating a representative to BOD is performed as prescribed in the 2014 Law on Management and Utilisation of State Capital, 2020 Law on Enterprises, and Decree 159/2020/ND-CP dated 31 December 2020 of the Government on the management of titleholders, officeholders, and representatives of state capital in enterprises (see Box 8.4). The process for BOD election at SOEs should adhere to the 2020 Enterprise Law and the General Meeting’s Regulations on Nomination, Self-nomination, and Election.
Box 8.4. Requirements for designation or nomination as representatives of state ownership interests stated in Decree 159/2020/ND-CP dated 31 December 2020 of the government
Article 48. Documentation requirements for designation or nomination as representatives of state ownership interests
The request form for designation or nomination as the representative of state ownership interests which is signed by the head of the relevant competent agency or organisation.
The biodata completed by each of the recommended personnel by using the prescribed sample, enclosing the certification granted by the relevant competent authority and his/her 4x6 cm colour photo taken not over six months.
Self-reflection statement of performance in the last three years.
Comments and feedbacks of the leadership and the Party committee of the agency or organisation supervising the person recommended for nomination or designation as the representative of state ownership interests.
The competent Party committee’s conclusion regarding political standards.
Assessment opinions on each recommended person from the Party subcommittee of the place where he/she and his/her family are residing. If his/her residence is different from his/her family’s residence, the assessment opinion of the Party subcommittee of the place where he/she and his/her family are residing.
Income and asset declaration prepared by using the prescribed sample.
The copy of degree or certificate provided to meet qualification requirements for specific titles or offices. If any office or title holder-to-be possessing a degree, diploma or graduation certificate conferred by a foreign education institution, this qualification document needs to be recognised in Vietnam according to applicable regulations.
The health certificate issued by the relevant competent health care establishment less than six months ago.
The commitment to the compliance with the guidelines, resolutions and directions of the representative agency, and the implementation of roles and responsibilities and obligations of the representative of state ownership interests to the owner, which is approved by the representative agency.
Source: Decree 159/2020/ND-CP, Vietnamese Law Portal
In Viet Nam, as for wholly-owned SOEs, all potential applicants should be suggested by the SOE boards and nominated by state authorities. In shareholder meetings, applicants who are nominated by ministers should be voted to SOE board. However, when undertaking restructuring processes or there is a lack of applicants, the Prime Minister, other ministers or relevant authorities are authorised to undertake a direct appointment to the board. In reality, it is a common practice that the Chairperson and members of the Member’s Council are appointed by the owner’s representative agency. When state authorities nominate a public official to the SOE board, he/she shall no longer act as an official.
The electoral procedure of BOD for partially-owned SOEs is performed in the form of cumulative voting as prescribed in the 2020 Law on Enterprises and Charter of joint stock companies. At the general meeting of shareholders, shareholders with voting shares are entitled to pool their votes together when nominating BOD members. The nomination of BOD members in joint stock companies depends on the number of shares one holds in the companies as prescribed in the Charter of joint stock companies. If the State holds more shares than the minimum number of shares required, the State will have the right to nominate. If not, the State will have to convince other shareholders who participate in the nomination. The number of candidates each group may nominate depends on the number of candidates that the general meeting of shareholders determines and the proportion of shares each group of shareholders hold. There is no wide advertisement for SOE board vacancy and no use of head-hunter.
F.3. [The state’s prime responsibilities include:] Setting and monitoring the implementation of broad mandates and objectives for SOEs, including financial targets, capital structure objectives and risk tolerance levels;
The owner’s representative agency is responsible for supervising SOEs in their implementation of assigned objectives and tasks, including financial objectives and tasks. For instance, the tasks and goals assumed by a wholly state‑owned enterprise are overseen by the State through its ownership representative agency. The goals set out by the State for these companies include financial targets and capital structure targets, but the degree of risk acceptance is not provided.
As per Article 9 of Decree No. 10/2019/ND-CP, the 2014 Law on Management and Utilisation of State Capital and relevant laws, the owner’s representative agency reserves the rights and responsibilities to inspect and supervise the implementation of SOE’s tasks and plans. In particular, Clause 4 Article 9 of Decree No. 10/2019/ND-CP prescribes the role of the owner’s representative agency in supervision and inspection of the implementation of the approved plan as follows:
a) The owner’s representative agency shall have to carry out the supervision and inspection of implementation of plans stated in Clause 2 of this Article and the assessment of results of implementation of these plans.
b) The owner’s representative agency shall instruct and encourage an enterprise to prepare and submit the mid-term and final assessment report on implementation of plans to serve the purposes of supervision and inspection, including the following main information:
i. Latest updates on implementation of assigned objectives, tasks and targets in the plan
ii. Latest updates on implementation of solutions specified in the plan
iii. Restrictions and causes of failure or unsuccessful implementation of the plan (if any)
iv. Subsequent solutions to accomplishing objectives in the plan of the following period.
c) Sequences and time limits for submission of review reports shall be subject to the Government’s regulations on the regime for supervision and inspection of implementation of strategies, plans, objectives and tasks under the delegated authority of state enterprises.
F.4. [The state’s prime responsibilities include:] Setting up reporting systems that allow the ownership entity to regularly monitor, audit and assess SOE performance, and oversee and monitor their compliance with applicable corporate governance standards;
For ministries and agencies, supervise and manage the State capital according to sectors and fields, manage through the periodic reporting system stipulated in specific policies; the periodic examination (in co‑ordination with ownership entities) on policy implementation, inspection of the performance of projects or the whole SOEs are conducted under the direction of the Government or at the request of competent authorities if there is evidence showing signs of violations.
Currently, an ownership entity’s supervision of SOEs’ operation and external reporting of SOEs is being implemented per provisions of the 2014 Law on Management and Utilisation of State Capital, 2020 Law on Enterprises, and other relevant normative legal documents. Supervisory activities of an ownership entity can be performed via a Board of Control established by the owner’s representative agency; periodical/ad hoc reports; periodical/ad hoc inspection and examination; and other forms as prescribed by the law.
Regarding SOEs that are publicly-traded joint stock companies, their reporting practice must also comply with provisions of Law on Securities. Entities that an SOE frequently reports to include the owner’s representative agency, Ministry of Planning and Investment (MPI), Ministry of Finance (MOF) and Ministry of Labor – Invalids and Social Affairs (MOLISA). As for SOEs that are in CMSC’s portfolio, they must report all matters that it is obligated to report to CMSC as prescribed by law. CMSC exercises corporate finance oversight over SOEs in its portfolio.
In addition to the reports generally applicable to enterprises (e.g. tax reports, labour reports, implementation of social insurance, etc.), SOEs are mandated to have to submit periodic reports on financial statements and the use of state capital to the ownership entities; statistical and specific reports at the request of ministries and sectoral management agencies. For instance, public debt reports on the use of government-guaranteed bonds and reports on government-guaranteed foreign loans should be submitted to the Ministry of Finance.
Furthermore, depending on the specific industry and business line, enterprises must also report to relevant specialised management authorities per specialised written legal documents. For instance, a wholly state‑owned enterprises Mobifone which is in CMSC’s portfolio reports to Vietnam Telecommunications Authority – Ministry of Information and Communications (MIC) per the 2009 Law on Telecommunications. It also reports to the State Bank of Vietnam (SBV) on matters related to the provision of intermediary payment services and reports to the Authority of Broadcasting and Electronic Information on matters related to the provision of information services.
However, OECD mission team has not been informed to what extent processes and methods used by owner’s representative agency and ministries to monitor SOEs performance are benchmarked against the absolute targets or against private enterprises.
F.5. [The state’s prime responsibilities include:] Developing a disclosure policy for SOEs that identifies what information should be publicly disclosed, the appropriate channels for disclosure, and mechanisms for ensuring quality of information;
The Government’s instructions on publication and disclosure of SOEs’ information are prescribed in the 2020 Law on Enterprises, Decree No. 47/2021/ND-CP dated 1 April 2021 of the Government on detailing a number of articles in the Law on Enterprises and other relevant legal documents. The Decree No. 47/2021/ND-CP specifies what should be disclosed, principles of disclosure as well as forms and means of disclosure. Furthermore, as for SOEs that are publicly-traded joint stock companies, their disclosure must also comply with the Law on Securities.
The Ministry of Planning and Investment (MPI) is responsible for managing disclosure for 100% state‑owned enterprises and SCIC is responsible for managing disclosure for publicly traded enterprises.
SOEs are mandated to send quarterly financial statements including financial expenses to tax authorities and ownership entities in accordance with the provisions of the Law on Tax Administration, the 2014 Law 69 on Management of State Capital and related guiding documents. In recent years, the Ministry of Finance has been studying and promulgating many regulations on the application of accounting standards in the operations of enterprises.
Accordingly, general norms are applied in line with the international accounting regime, reasonability and validity of financial costs. In addition, the competent authorities, namely the State Audit and the Inspectorate of the Ministry of Finance are mandated to review and assess financial costs of SOEs on a periodic basis or make appropriate recommendations for relevant entities (enterprises, the owner representatives, tax authorities, etc.).
In general, the disclosure of information of SOEs has been regulated according to each legal policy and for relevant agencies (ministries, agencies, ownership entities) but the information is not systematically publicly available through mass media and through enterprises’ own website.
F.6. [The state’s prime responsibilities include:] When appropriate and permitted by the legal system and the state’s level of ownership, maintaining continuous dialogue with external auditors and specific state control organs;
Dialogue between external auditors and the State is stipulated in laws such as the Law on Accounting, the 2020 Law on Enterprises and 2014 Law 69 on Management of State Capital. According to these laws and regulations, external auditors are responsible for periodically auditing SOEs, thereby objectively and fairly assessing the financial position of enterprises, making recommendations to the Board of Directors and the ownership entities on SOEs’ activities. The State Audit is mandatory and conducted at least every two years as prescribed in the Law on State Audit and policies promulgated by ministries, agencies. As such, the State Audit has the right to make recommendations to the government, Ministries, agencies, ownership entities on proposals to amend policies and address legal violations of SOEs.
F.7. [The state’s prime responsibilities include:] Establishing a clear remuneration policy for SOE boards that fosters the long- and medium-term interest of the enterprise and can attract and motivate qualified professionals.
Wages and remunerations of SOEs’ BODs and Members’ Council are provided as prescribed by the government and MOLISA. As per provisions of law on remuneration management in the Government’s Decree No. 53/2016/ND-CP dated 13 June 2016, the payment and remuneration scheme for BOD members of enterprises where the State has a controlling interest is developed on an annual basis based on the targets of state capital preservation (profit), classification of SOEs, SOE leadership positions and SOE performance results and are publicly sent to relevant agencies. In general, wages and remunerations of SOEs’ BODs are lower than those of the private enterprise of the same size or of the same business sector.
Performance of its BOD gets evaluated by an owner’s representative based on results of performance evaluation of SOEs and financial reports. In principle, such BOD evaluation results should be reflected in the payments, remunerations, and bonuses for BOD members.
However, OECD mission team has learned that in practice, wages and remunerations of SOEs’ BODs are yet to be based on assessments by a state ownership representative on their work performance and tied to the KPIs of the enterprise (productivity, profit, etc.), indicating an insufficient level of accountability for BOD in governing the enterprise. In general, wages and remunerations of SOEs’ BODs are lower than those of the private sector.
References
[1] OECD (2022), OECD Economic Surveys: Viet Nam 2022, OECD Publishing, Paris, https://doi.org/10.1787/8f2a6ecb-en.