Double-digit GDP growth: A heavy responsibility falls on state-owned enterprises.

The effectiveness has decreased.

During the period 2010–2015, state-owned sector investment increased by an average of approximately 6.34% per year. However, by the period 2020–2024, this figure had fallen to only about 2.6% per year.

The proportion of state-owned investment in the overall economy also decreased sharply, from 44% in 2010 to 27.6% in 2024. Specifically, the proportion of investment by state-owned enterprises (SOEs) in total public investment decreased from 43.56% in 2010 to 34.43% in 2023.

Based on the above data, Dr. Huynh Thanh Dien from Nguyen Tat Thanh University noted that the growth of investment capital in the state sector in recent years has been significantly slower than that of the non-state sector.

Not only is the size of state-owned enterprises (SOEs) decreasing, but their capital efficiency is also a cause for concern. According to Mr. Dien, SOEs are often large-scale enterprises, but their ICOR (Incremental Capital-Output Ratio) – reflecting capital efficiency – is higher than that of the private sector and FDI.

Specifically, in 2023, the ICOR of the state sector was 6.19, while the private sector was 4.9 and the FDI sector was 4.67. This shows that to generate one unit of growth, the state sector has to invest a larger amount of capital, meaning lower investment efficiency.

"Although state-owned enterprises (SOEs) are identified as playing a leading role in the economy, in reality, the level of investment and operational efficiency of this sector is trending downwards. SOEs should ideally operate in key sectors with stable demand and relatively certain profitability, but their investment efficiency is significantly lower than that of the private sector and FDI," he said.

The root cause of this paradox lies in the governance mechanisms and investment institutions for state-owned enterprises.

The Phuong Nam Pulp Mill project in Thanh Hoa commune, Tay Ninh province (formerly Long An province) is one of the most persistent and difficult-to-resolve loss-making cases in the Ministry of Industry and Trade. (Photo: Nguyen Hue)

According to current guidelines, state-owned enterprises (SOEs) must focus on key industries and sectors, essential public services, and national defense and security tasks. At the same time, SOEs are forced to divest from many other sectors as required by policy. This has led to a shrinking operating space for SOEs, a lack of legal basis for participating in new, highly effective sectors, and difficulties in seizing emerging business opportunities based on market signals.

Furthermore, the authority of the owner's representative agency over state-owned enterprises (SOEs) remains overlapping and highly intrusive. Although the law allows the owner's representative to directly decide on investments up to 50% of the equity capital, many internal regulations require enterprises to seek opinions and reports before making decisions. The lengthy appraisal and approval process and complex procedures slow down investment progress, increase costs, reduce capital efficiency, and even cause enterprises to miss market opportunities.

Another important reason is the issue of personnel and incentive mechanisms. The selection of owner representatives and management teams for state-owned enterprises has not truly followed market principles, and is still heavily influenced by administrative factors.

On the other hand, many cases of transferring personnel from the administrative sector to enterprise management have not fully met the requirements of business administration. The salary and bonus mechanisms are tightly controlled and less attractive compared to the private sector, making it difficult for state-owned enterprises to attract and retain high-quality personnel.

Furthermore, according to Mr. Dien, the legal framework for handling risks in the investment and business activities of state-owned enterprises is still unclear. Business always involves risks, but if every risk of capital loss is attributed to individual responsibility, it will create a mentality of fear of making mistakes and fear of responsibility, stifling the motivation for innovation and daring to act.

In reality, many state-owned enterprises (SOEs) suffer prolonged losses, become insolvent, and incur large interest expenses for many years, yet there is still no clear legal framework for the thorough restructuring or bankruptcy of SOEs according to market mechanisms.

Operating according to modern market logic.

In this context, Dr. Huynh Thanh Dien believes that the spirit of Resolution 79 on the development of the state-owned economy, recently issued, is very important. However, to develop state-owned enterprises (SOEs) into a force capable of leading the market in accordance with the spirit of Resolution 79, the core issue lies not only in the requirement for growth or expansion of scale, but also in the comprehensive reform of the institutional framework for governance and the operating mechanisms of SOEs according to modern market logic.

He pointed out four key points to note.

Firstly , it is necessary to clearly classify state-owned enterprises (SOEs) according to their functions and operational objectives, instead of applying a uniform management mechanism. SOEs can be divided into three main groups.

The first group consists of state-owned infrastructure enterprises, whose role is to ensure the provision of essential services at reasonable prices and to promote regional connectivity and spatial development linkages.

The second group consists of state-owned enterprises that provide public services in fields such as education , healthcare, and culture, aiming to achieve social welfare goals and improve the quality of life.

The third group consists of state-owned enterprises operating in the commercial sector, participating in fair competition in the market with the goal of generating profits for the State and contributing to the budget.

Each of these business groups needs its own goals, evaluation criteria, and governance mechanisms, avoiding a "one-size-fits-all" approach.

Secondly , it is essential to ensure the independence, standards, and transparency of state-owned enterprises' operations. The overarching principle is that the State does not directly interfere in the day-to-day business decisions of enterprises, but manages them through objectives, standards, and oversight mechanisms.

State-owned enterprises need to publicly and transparently disclose financial information, business results, and corporate governance in accordance with international standards, creating market discipline and enhancing accountability.

Thirdly , it is necessary to enhance the independence and capacity of the state-owned enterprise supervisory body. This body must have sufficient authority, resources, and expertise to conduct objective supervision, free from the influence of vested interests.

In particular, a clear risk management framework is needed to assess accountability. When managers have fully complied with risk management procedures but still encounter objective risks, a mechanism for exempting individuals from liability is necessary. Only then can genuine motivation be created to encourage people to "think big, act boldly, and take responsibility."

Fourth , it is necessary to clearly identify which sectors the State needs to retain ownership of in the long term and which sectors need to be divested.

State capital must be concentrated in key sectors that are strategically important to national security, social welfare, and macroeconomic stability; at the same time, in areas where the private sector can perform better, divestment should be boldly pursued to improve the efficiency of resource allocation.

International experience shows that successful state-owned enterprise models share a common characteristic: a clear separation between state management functions and ownership functions, granting genuine power to enterprises accompanied by strict and transparent oversight mechanisms.

In Vietnam, despite numerous reform efforts, state management agencies still simultaneously assume the role of owner's representative, while the legal framework regarding the conditions and standards for ownership representative agencies is not yet truly clear. This causes many investment and business expansion proposals of state-owned enterprises to be delayed, resulting in missed market opportunities, according to Dr. Dien.

Oil and gas extraction at the Bach Ho field. (Photo: Petrovietnam)

What are countries doing to develop state-owned enterprises?

Drawing on the most successful SOE development models in the world, Antoine Goupille, M.A., Lecturer in Management, Faculty of Business at RMIT University Vietnam, points out three key aspects.

Firstly , it's about professionalizing the role of ownership. The most important lesson is shifting the State from a direct management role to a professional strategic shareholder role. Temasek of Singapore is a prime example.

This organization operates as a state-owned investment company independent of politics. Temasek requires commercial viability and governance to meet international standards for the businesses in its investment portfolio.

"The separation allows state-owned enterprises to compete globally based on their actual capabilities, while reducing administrative restrictions that hinder operational efficiency," he told VietNamNet reporters .

Secondly , it involves adopting governance standards based on global criteria. Typical state-owned enterprises worldwide apply rigorous corporate governance standards, often aligned with OECD principles, to clarify accountability and increase the autonomy of management.

Partial listings or privatizations, as seen in Brazil and Poland, are not only aimed at raising capital but also at introducing market discipline, increasing transparency, and diversifying ownership while maintaining strategic control.

Thirdly , there is strategic focus and innovation. Successful state-owned enterprises (SOEs) often concentrate resources on strategic areas where the private sector has not invested sufficiently, such as national infrastructure, digital platforms, or cutting-edge technologies.

Some Chinese state-owned enterprises, for example, are demonstrating that policy-oriented businesses can still be drivers of innovation in strategic, high-risk sectors, provided they operate under a corporate model with professional governance.

Vietnamnet.vn

Source: https://vietnamnet.vn/tang-truong-gdp-hai-con-so-trach-nhiem-lon-dat-len-vai-dnnn-2490469.html