The future of Việt Nam's economic growth lies in a bold and transformative approach to State-owned enterprise (SOE) reform. This is the key takeaway from a recent seminar in Hà Nội, where experts and policymakers gathered to discuss the critical role of SOEs in the country's development.
In my opinion, the current state of SOE reform in Việt Nam is a fascinating case study in the challenges of balancing economic growth with strategic self-reliance. While SOEs have undoubtedly contributed to the country's progress, there's a growing recognition that a new vision is needed to unlock their full potential.
The Current State of SOEs
Việt Nam's SOEs are a significant economic force, with a collective asset value of approximately $172 billion and a substantial impact on the country's budget, job creation, and growth. However, as Nguyễn Đức Hiển, deputy head of the Party Central Committee's Commission for Policies and Strategies, pointed out, their performance hasn't matched the scale of resources at their disposal.
Many SOEs have led strategic industries, but progress in restructuring, equitisation, and State capital divestment has been slow. This has resulted in a sector that, while large, lacks the dynamism and innovation needed to drive rapid and sustainable economic growth.
One of the key issues is the limited labour productivity, corporate governance, and technological capability across much of the sector. This is a critical area that needs addressing if SOEs are to become the anchor companies that can support and connect small and medium-sized enterprises, as Hiển suggested.
A New Vision for SOE Reform
The Politburo's Resolution 79 offers a fresh perspective on SOE reform, moving away from simple administrative reorganisation towards a more strategic approach. The focus is on transforming governance models to enable SOEs to lead essential and strategic sectors, with a greater emphasis on resource allocation and effectiveness.
What makes this particularly fascinating is the shift in mindset. Instead of just rearranging the pieces, the goal is to restructure and reallocate resources to create nationally competitive corporations. This is a bold move that could significantly impact Việt Nam's economic landscape.
Hiển's call for discussions on how SOEs can evolve into anchor companies is a crucial step. By connecting State corporations with private businesses and SMEs, SOEs can strengthen domestic supply chains and enhance national competitiveness. This is a complex task that requires a deep understanding of market dynamics and the ability to foster collaboration between different sectors.
Defining the Role of SOEs
Another critical aspect of the new vision is the need to clearly define which industries should remain under SOE leadership. Hiển suggested focusing on strategic infrastructure, foundational technologies, essential public services, and sectors where private investment is insufficient.
This raises a deeper question about the role of the State in the economy. While SOEs can provide stability and strategic direction, they must also be agile and responsive to market demands. Finding the right balance is a delicate task that requires a deep understanding of the industry and a forward-thinking approach.
Governance Reform and Autonomy
Governance reform is a key pillar of the restructuring process, with all SOEs expected to adopt OECD governance standards by 2030. This shift in evaluation criteria, from annual financial indicators to broader performance assessments, is a welcome move. It encourages long-term investment in innovation and science and technology, including riskier projects that could drive significant growth.
However, a detail that I find especially interesting is the need to separate commercial activities from political and public service responsibilities. This is a complex task that requires a clear understanding of the boundaries between the State and the market. Removing institutional bottlenecks and granting SOEs greater authority and accountability is a bold step towards achieving this balance.
Overcoming Obstacles
Despite the ambitious vision, several obstacles are slowing SOE reform. Implementation capacity is a major challenge, with officials hesitant to make decisions due to regulatory concerns and personal accountability. This has led to delayed restructuring and missed investment opportunities.
To address this, stronger legal protection for officials acting within regulations is needed, along with simplified rules governing asset valuation and land-use issues. Greater decentralisation, accompanied by effective post-audit supervision, could also help empower officials to make timely decisions.
The practical challenges of State capital divestment are also significant. Many subsidiaries generate marginal profits, making them unattractive to investors, while unresolved land-use rights and business valuation issues delay divestment.
The Role of the Stock Market
The stock market has a crucial role to play in improving SOE governance and transparency. Public listings and transparent auctions provide an effective mechanism for valuing State assets during equitisation, reducing the risk of capital losses.
Additionally, stock market participation can help diversify ownership structures, improve corporate governance, and reduce dependence on bank financing. This is a powerful tool for attracting investment and creating high-quality listed companies, as seen with Vietcombank, BIDV, VietinBank, PV GAS, and Airports Corporation of Việt Nam.
Conclusion
Việt Nam's approach to SOE reform is a fascinating case study in economic development. The country is taking a bold step by rethinking its approach to SOEs, moving towards a more strategic and resource-focused model. While challenges remain, the potential for SOEs to drive economic growth and enhance national competitiveness is significant.
As Việt Nam continues to review its socio-economic performance and set new development priorities, the role of SOEs will be a critical factor in achieving its ambitions for rapid and sustainable growth.
