State-owned enterprises: strong or weak?
| State-owned enterprises: strong or weak? | ||
| 14:06' 04/06/2007 (GMT+7) | ||
In terms of quantity, by early 2006, Vietnam had 4,086 operating SOEs, accounting for only 3.6% of the total active enterprises in Vietnam, and equivalent to less than one-third of the total SOEs in the pre-renovation period. As the equitisation process is accelerated, this ratio will decrease more quickly.
Of the total number of SOEs, the number of SOEs that are managed by provincial and municipal governments is higher than that of those controlled by the central government (55.3% and 44.7%, respectively). The SOEs of the first kind have smaller scale and less modern equipment and technology as well as lower business effectiveness than the second, so the number of SOEs of this kind is high.
Moreover, the mechanism in which SOEs are managed by ministries and provincial People’s Committees is unsuitable to the market economy, which Vietnam is building because in the market economy, all businesses compete equally. This fact requires higher speed of equitisation.
Though the average labour scale of SOEs is higher than private and foreign-invested ones (499.5 workers compared to 28.2 and 330.2 people, respectively) the number of workers in SOEs is gradually declining in total number (from over 4.114 million in early 2002 to nearly 2.041 million in early 2006) and percentage of total number of workers in all kinds of businesses (from 53.8% to 32.7% in the same period).
Though the average capital of SOEs is higher than that of private and foreign-invested ones (VND327.5 billion compared to VND5.8 billion and VND132.5 billion), the percentage of capital of SOEs of the total capital of enterprises has declined, from 55.9% in 2001 to 54.9% in 2005, while that of private businesses has increased, from 12% to 25% in those same years.
According to the Finance Ministry, the total assets of SOEs reached VND747.4 trillion in early 2006. However, debts accounted for 22.2% and 76% of the volume were bank loans.
Except for SOEs that benefit from business advantages and enjoy special preferential policies, the business effectiveness of other SOEs is low.
The Vietnam Oil and Gas Group (PetroVietnam) earned revenue of VND42.31 trillion and VND24.924 trillion of profit; VND38.818 trillion and VND3.2 trillion for the Electricity of Vietnam (EVN) group; VND32.76 trillion and VND11.56 trillion for the Vietnam Post and Telecommunications Group (VNPT); VND22.788 and VND3.130 trillion for the Coal and Minerals Group.
SOEs that contributed greatly to the State Budget were the Vietnam Petroleum Import Export Corporation (VND8.252 trillion), the Vietnam National Tobacco Corporation (VND3.13 trillion), and the Saigon Beverage Corporation (VND2.13 trillion).
In the 2001-2005 period, the revenue of SOEs rose by 9.1% per annum only and it was just 7.2% in 2005, just a little bit higher than the increase of the consumer price index.
There were many ineffective SOEs and most of them operate in the fields of agriculture, paper, textiles, sericulture, sugar and sugarcane, and seafood. The total losses of SOEs in 2005 were VND1.919 trillion. Loss-making SOEs accounted for 19.5% and 8.8% broke even.
Big loss-making SOEs were the Vietnam Cement Corporation, Coffee Corporation, Transport Work Construction Companies 5 and 6, Thang Long Construction Corporation, Sericulture Corporation with losses from VND220 to VND1,352 billion, 13 times more than the average capital of SOEs.
Major reasons for the weakness of SOEs include backward equipment and technology; poor use of modern equipment (if possessed at all); total investment too big, leading to high deductions and loan interest in production costs; waste in production processes; and higher expenses for salary.
The above analysis shows that it is necessary to speed up equitisation while improving the quality of operations of SOEs so they can compete with foreign rivals when Vietnam opens its door more widely.
(Source: TBKTVN) |
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