OECD Review of the Corporate Governance of State-Owned Enterprises in Viet Nam

6. Recent and ongoing reforms

Abstract

Viet Nam has taken important measures for SOE restructuring following Doi Moi reforms in 1986. SOEs restructuring is at the centre of Viet Nam’s socio‑economic development strategies, and a pillar for the national economy to reach its goal of reaching high-income status by 2045. This chapter provides an overview of the government’s efforts made to reform SOEs and its plans to further implement SOEs equitasation goals, including through alignment with international standards such as the SOE Guidelines.

The state‑owned enterprise reform process is closely associated with the reforms process of the Vietnamese economy. Since 1992, Viet Nam has been reforming its SOE sector mainly through measures of assignment, sale, contract, lease, dissolution of enterprises and equitisation without much success. The second wave of restructuring of SOEs was from 2010 to 2015, as it was listed as one of the main pillars of the Socio-Economic Development Strategy 2011‑20 and five‑year Socio-Economic Development Plan 2011‑15.

The third wave of SOE reforms started from 2016, notably through the establishment of the SOE governing body, CMSC, in 2018. In early 2021, the 14^th Communist Party Congress adopted the Socio-Economic Development Plan (2021‑25) and the Socio‑economic Development Strategy (2021‑30), highlighting the country’s goal to reach upper middle‑income status by 2030 and high-income status by 2045. These once again stressed on streamlining SOEs and also keeping essential ones such as ones related to national defense and security and sectors in which enterprises of other economic sectors do not invest.

The strategies aim to consolidate and develop a number of large‑scale, efficient state‑owned economic groups capable of regional and international competitiveness, ensure transparency in the restructuring of SOEs, especially with regard to equitisation and divestment of state capital in enterprises. It is set to complete the rearrangement of SOEs by 2025.

Table ‎6.1. Recent developments on corporate governance of SOEs (2016‑21)

Year
2016	Adoption of Decision No. 58/2016/QĐ/TTg on the criteria for classifying SOEs and the list of SOEs arranged in the 2016‑20
2016	Adoption of Circular No. 115/2016/TT-BTC by Ministry of Finance on amending and supplementing a number of articles of Circular No. 196/2011/TT-BTC on equitisation
2017	Adoption of resolution 121‑NQ/TW of the Central Committee on continuing to innovate, restructure and improve the performance of state‑owned enterprises (SOEs) and the economic development strategy (2011‑20)
2018	Adoption of Law on Public Debt Management and Decree No. 91/2018/ND-CP on Granting and managing Government guarantees
2018	Adoption of Law 69 on management and utilisation of state capital, and the Decree No. 131/2018/ND-CP
2018	Establishment of the Committee on Management of State Capital at Enterprises
2019	Adoption of Decision No. 6/2019/QD/TTg on approving the list of equitised enterprises until 2020.
2020	Adoption of Law on Enterprises No. 59/2020/QH14
2021	Adoption of Decision No. 22/2021/QD-TTg on criteria for classifying state‑owned enterprises for ownership conversion and rearrangement during equitisation phase 2021‑25
2022	Adoption of Decision No. 360/QD-TTg on improving competitiveness of SOEs on the basis of technology, innovation, and management capacity, phase 2021‑25
2022	Adoption of Resolution No. 68/NQ-CP on the continuation to innovate, improve operational efficiency and mobilise resources of state‑owned enterprises, focusing on economic groups and corporations

In 2020, Ministry of Planning and Investment initiated the project “Development of large‑scale SOEs”, especially multi‑owned State‑owned economic groups, with aims to promote the roles of SOEs in paving the way as lead enterprises of major economic sectors, as listed in Resolution No. 18/NQ-CP dated 26 February 2020.

The project was initiated back in 2017 from resolution 12‑NQ/TW of the Central Committee on continuing to innovate, restructure and improve the performance of SOEs and the economic development strategy (2011‑20), which clearly affirmed the role of SOEs “as an important material force of the state economy”. The mission and objectives were set out: “Consolidate and develop a number of state‑owned economic groups with large scale, effective operation, and promote regional and international competitiveness in the region”.

The Project will focus on two main priorities. First, to reform and develop a number of large‑scale economic groups on the basis of enhancing links in value chains, promoting innovation using untapped SOEs resources, incorporating private sector’s resources to co‑ordinate. Second, to establish mechanisms and policies to allow SOEs to participate in investment in a number of industries and fields that are paving the way and achieve the objectives of the Socio-Economic Development Strategy of the country. These areas include electricity, petroleum, and airlines. Whether or not this move will imply further preferential access to state‑owned bank loans is not clear.

Since November 2021, the Ministry of Finance has been assigned as the main ministry responsible for amending Law No. 69/QH13/2014 on Management and Utilisation of State Capital Invested in Enterprises with a view to making it more aligned with the OECD SOE Guidelines. Objectives of the amendment include: improving the institutional framework; creating an enabling legislation environment for management of state capital at enterprises; enhancing the autonomy and self-accountability of enterprises; and strengthening the state’s inspection and supervision in management of the state capital at enterprises. The government plans to submit the revised Law by the end of 2023 to the National Assembly, which will then be promulgated in early 2024, if approved.

In the same vein, the Ministry of Finance issued Decision No. 246/QD-BTC in 2020 on its plan to supervise state capital investment in enterprises. Accordingly, the Ministry of Finance is required to supervise state capital investment in enterprises from 2021 at two ministries and branches, namely the Ministry of National Defense and the State Bank. The State Bank will indirectly supervise the additional investment in charter capital for the Bank for Agriculture and Rural Development of Vietnam from the payment of special bonds.

Following the Government’s Resolution of the 5^th Conference of the Central Committee of the Communist Party of Vietnam term XIII to review the Land Use Law, the Corporate Finance Department of the Ministry of Finance is to conduct a study and submit to the National Assembly for promulgation the Law amending and supplementing the Land Use Law. In particular, the Department aims to come up with a plan to re‑assess SOEs which are going through equitisation process to ensure its feasibility and suitability for regulations on enterprise valuation and land use right valuation, and to separate the value of land use from the enterprise value.

Most recently, on 12 May 2022, the government issued Resolution No. 68/NQ-CP on the continuation to innovate, improve operational efficiency and mobilise resources of SOEs, focusing on economic groups and corporations. The Resolution recognises that the performance of the SOE sector is not commensurate with the resources it holds and that there are still low-efficient SOEs and projects, with prolonged losses. The government requires ministries, ministerial-level agencies, the People’s Committees of the provinces, the Members’ Council, and the representative of the State’s capital in enterprises to implement the key targets to accelerate reforms. The Resolution also requires SOEs to implement corporate governance in line with the OECD Guidelines on Corporate Governance of State‑owned Enterprises (see Box 6.1). However, the Resolution explicitly support creation of “favourable conditions” for business activities of SOEs, raising competitive neutrality concerns.

Despite ongoing efforts from the central government and line ministries, the reforms of SOEs in Viet Nam still face some challenges, mainly due to a lack of delineation of roles and responsibilities of the state owners and ambiguity in the interpretation of different legislations and regulations. How Viet Nam will prioritise the restructuring of its SOE sector remains to be seen.

Table ‎6.2. Ongoing draft legislations on corporate governance of SOEs

Ministry in charge	Proposed legislation
MOLISA	Draft Decree policies for redundant employees when changing ownership or rearranging a one‑member limited liability company in which 100% of charter capital is held by the State
MOF	Draft Decree on the use of revenue from enterprise ownership conversion
MOLISA	Draft Decree on salary at State‑owned enterprises
MOF	Draft Decree on criteria and lists of classification of State enterprises and enterprises with State capital, public non-business units
MOF	Decision approving the Scheme on restructuring State‑owned enterprises, focusing on economic groups and State Corporations for the period of 2021-25, allowing representative agencies of owners and enterprises a basis for implementation
MOF	Amendments and supplements to Law No. 69/2014/QH13.

Box ‎6.1. Resolution No. 68/NQ-CP on Continuation of State‑owned Enterprises Reforms, Improving Efficiency in the operational and resources mobilisation processes

Targets:

1. Perfect mechanisms and policies to focus on removing difficulties and obstacles, creating favourable conditions, and increasing the initiative in production and business activities of SOEs.

2. Focus on improving the operational efficiency of the SOE sector, taking production and business efficiency, the observance of the law on investment, management and use of state capital as the main evaluation criteria. Focus on business ethics, corporate culture, resolutely reducing costs, streamlining the apparatus and improving operating capacity. Regularly foster professional qualifications, ensuring the material and spiritual life of officials, employees and employees.

3. Improve the productivity, quality, efficiency and competitiveness of enterprises through promoting digital transformation and application of science and technology, encouraging the formation of innovation centres at enterprises.

4. Consolidate and develop a number of large‑scale economic groups and corporations with technological and innovation capabilities for investment and development in a number of new or important industries and fields of the economy such as energy (with priority given to renewable energy, clean energy), national infrastructure, finance, telecommunications industry, semiconductor industry and core technology.

5. By the end of 2025, aim to achieve a number of specific goals and targets as follows:

a. 100% of economic groups and state‑owned corporations apply governance on the digital platform, implementing corporate governance in line with the OECD Guidelines on Corporate Governance of State‑Owned Enterprises.

b. 100% of economic groups and corporations have new implementation projects, including a number of typical investment projects with leading and pervasive nature, conserving brand name of SOEs.

c. At least 25 SOEs with equity capital or capitalisation on the stock market reaching over USD 1 billion, of which there are at least ten enterprises with over USD 5 billion.

d. 100% of SOEs have orientation and implementation of investment transformation, towards investment projects, using green, clean technology and reducing carbon emissions.

e. The average contribution of economic groups and state corporations to the state budget in the 2021‑25 period increase by 5%‑10% compared to the 2016‑20 period.

Source: Resolution No. 68/NQ-CP on Continuation of State‑owned Enterprises Reforms, Efficiency Improving Efficiency in the operational and resources mobilisation processes, Vietnamese Law Portal, https://thuvienphapluat.vn/en/