Changing the overly restrictive "garment" for state-owned enterprises.

The current mechanism for managing state-owned enterprises is like a garment that's too tight; it's time to replace it with a new one and stop administrative interference in the operations of these enterprises.

State-owned enterprises need a sufficiently flexible mechanism to compete on a level playing field. Photo: Duc Thanh

Allow businesses to decide their own production and business plans.

This week, the final working week of the Eighth Session, on the afternoon of November 29th, the National Assembly will discuss in the plenary session the Draft Law on Management and Investment of State Capital in Enterprises (the Draft).

Previously, the draft was discussed in committee meetings of the National Assembly, with many opinions emphasizing the need to "unleash" state-owned enterprises.

Presenting the draft law to the National Assembly, Deputy Prime Minister Le Thanh Long stated that the current law reflects a detailed and narrow approach, limiting the autonomy of businesses in using capital and assets in production and business activities.

Current regulations still reflect the "administrative interference" of the State in the operations of enterprises, failing to comprehensively manage the flow of State capital invested in enterprises, and not including the content of restructuring and reorganizing State capital in enterprises.

The Deputy Prime Minister stated that the draft clearly defines the State as the owner of invested capital, managing it according to its capital contribution in enterprises, without administrative interference in the enterprises' operations. This revision strengthens decentralization coupled with the accountability of enterprises.

The draft regulations stipulate that state-owned enterprises playing a leading and key role in the economy , enterprises managing critical national infrastructure, and enterprises operating as groups of companies including economic conglomerates, corporations, parent companies, and subsidiaries must develop and have their business strategies approved. Other state-owned enterprises are not required to develop and have their business strategies approved under this law.

During the review, the Finance and Budget Committee of the National Assembly stated that business planning is a management activity of the enterprise, and the owning agency should not interfere in the preparation, approval, and implementation of the enterprise's business plan.

Regarding the use of the Development Investment Fund in enterprises, the reviewing agency proposes specific regulations on the authority, decision-making, scope, and content of its use, ensuring that the principle of state capital, after being invested in enterprises, is considered an asset and capital of the enterprise.

The view that received strong support from delegates during group discussions was that state capital invested in enterprises becomes the capital and assets of those enterprises.

"When capital becomes the enterprise's capital, it needs to be clearly stated that the State becomes the owner of shares corresponding to its capital contribution ratio, not the manager of the capital," suggested delegate Hoang Van Cuong (Hanoi).

While agreeing with the principle that state investment capital in enterprises must be preserved and developed, Representative Nguyen Manh Hung (Can Tho), Standing Member of the National Assembly's Economic Committee, expressed concern that applying this principle mechanically to all projects and investment activities of enterprises would create difficulties for them.

"If you invest in 10 projects, and 4-5 of them result in losses, but the remaining projects are profitable and the overall profit is high, then the evaluation should be that the task has been successfully completed, because no business can make a profit from everything it does. This needs further consideration so that we can have a mechanism to protect the managers and operators of businesses," Mr. Hung stated.

Chairman of the Board of Members of the Vietnam Agricultural and Rural Development Bank (Agribank), delegate Pham Duc An (Hanoi), commented that the current management mechanism for state-owned enterprises is like a garment that is too tight for the operations of state-owned enterprises. “In the past, joint-stock companies and private enterprises only wished to be given the same preferential treatment as state-owned enterprises, but now, state-owned enterprises want a mechanism that is as flexible as joint-stock companies, open enough to compete fairly and equally,” Mr. An said.

Evaluate the overall value delivered, not each individual task.

According to delegate Pham Duc An, this revision should shift from managing behavior to managing objectives.

According to delegate Pham Duc An, this new approach needs to consider a mechanism for evaluating the overall achievement of a state-owned enterprise's goals, rather than focusing directly on a specific action. "That is, out of 10 business decisions, 1-2 might be flawed, but if they weren't made for personal gain and the overall business targets for the year were still met, then no individual should be held accountable," Mr. An suggested.

The Chairman of Agribank suggested that this principle needs to be concretized through government guidelines and regulations, as well as in the enforcement by law enforcement agencies. Only then will businesspeople working in the state sector feel secure in carrying out their duties.

Many delegates in other discussion groups also shared the view that management should be based on objectives rather than procedures.

Representative Cao Manh Linh (Thanh Hoa) suggested that the management and supervision model for the activities of state-owned enterprises and state investments in enterprises needs to be re-evaluated. Instead of being overly involved in directing the investment activities of enterprises, the owning agency should focus on providing input on the organizational charter, operational strategy, and financial regulations of the enterprise. It should also concentrate on assigning performance evaluation targets based on financial profits, innovation, and socio-economic development goals. Based on this, the owner should monitor and evaluate performance against the assigned targets and provide guidance on profit distribution after the end of the fiscal year.

"It is necessary to minimize the need for owners to approve policies, provide guidance on investment activities, capital contributions, share purchases, project transfer contracts, etc.," Mr. Linh suggested.

The board of directors decides on the company's capital.

The business plans of state-owned enterprises should be decided by the board of directors, provided that they preserve and develop state capital while preventing and combating corruption, waste, and negative practices. The government and management agencies should have the tools to guide, inspect, and supervise. The law must boldly decentralize power, with the view that public investment should be carried out according to the Law on Public Investment, while the board of directors should decide where the capital of the corporation or enterprise is invested and be responsible for it, rather than seeking additional approval from administrative levels.

Prime Minister Pham Minh Chinh

In another discussion group, Prime Minister Pham Minh Chinh stated that the current model for managing state-owned enterprises is not yet stable, given that the country is still in the process of development. Therefore, the process of research and expansion should be gradual, with a spirit of neither perfectionism nor haste, emphasizing the principle of "keeping what works and discarding what doesn't."

The head of government emphasized: "Business operations must follow market principles, the law of value, supply and demand, and competition; administrative measures cannot interfere. Administrative interference distorts the market, goes against market principles, and undermines the development mindset."

According to the Prime Minister, when evaluating businesses, it is necessary to assess the overall value they bring, not just each individual task. For example, out of 10 assigned tasks, they may not perform well or incur losses in 2-3 tasks, but the "overall result is still positive" in terms of capital preservation and growth.

"Private enterprises work very quickly, they never go through bidding processes, but they do things correctly. We use bidding for everything, but in the end, there are still rigged deals, and disciplinary actions are constantly being taken. How can we learn from this?" the Prime Minister emphasized, and suggested reviewing and designing tools to encourage innovation, resolutely abandoning the mindset of prohibiting something because it cannot be managed.

Creating a level playing field for state-owned enterprises.

Currently, according to investment laws, enterprises, branches, and dependent accounting units do not have the legal capacity to invest in or propose projects. Therefore, to create fairness for state-owned enterprises in implementing investment procedures nationwide, and to promote projects of state-owned enterprises providing essential services such as electricity, banking, and telecommunications, it is proposed that relevant legal regulations be reviewed to supplement provisions allowing branches and dependent accounting units of parent companies and state-owned economic groups to invest in projects under authorization.

Delegate – businesswoman Tran Thi Hien (Ha Nam)

Source: https://baodautu.vn/thay-chiec-ao-qua-chat-cho-doanh-nghiep-nha-nuoc-d230972.html