The Third Party Plenum called for further acceleration of SOE reform. The direction viewpoint in this resolution includes: continuing to reform, develop, and raise the efficiency of SOEs to help SOEs implementing their role in maintaining the socialist orientation, stabilizing and developing Vietnamese economy, politics and society; reforming the management mechanism; continuing reform, rearranging, developing and raising the efficiency of SOEs are urgent as well as strategic missions; and raising the party leadership at all levels of authorities, and at all industries and branches.
The future role of SOE sector includes: providing necessary public-utility goods and services for the demand of national defense and security, being the key force in boosting the economic growth and providing ground for the industrialization and modernization of the country with the socialist orientation.
The orientation in rearranging and developing business and public-utility State enterprises: State holds 100% capital of business enterprises operating in state-monopoly fields; state holds dominate shares or 100% capital of state enterprises operating in some specific industries and domains (See Decision 58/2002/QD-TTg). These enterprises are providing the necessary commodities for production development, and spiritual and material improvement of rural people, and people in mountainous, remote, and deep areas.
State holds special shares in some necessary cases; and State converses 100% state capital business enterprises into one-member liability companies with an owner is the State, or joint-stock companies in which the shareholders are state enterprises. For existing public-utility SOEs, State holds100% capital of Public-utility state enterprises operating in some specific industries and domains (See Decision
58/2002/QD-TTg). State holds dominant shares of Public-utility state enterprises operating in some specific industries and domains (See Decision 58/2002/QD-TTg); and periodically the State adjusts the enterprise-classification orientation in order to fit with the socio-economic development’s demand.
Amending and Supplementing Mechanism and Policies With respect to Business State Enterprises
Enterprises decide their businesses based on demand-supply relations in the market to meet the objectives and their operational regulation. The budget subsidies to enterprises will be eliminated.
Priority policies for industries, areas, and goods and services encouraged to develop, regardless of economic sector, shall be carried out.
Law on competition shall be issued to protect and encourage enterprises in all economic sectors compete and cooperate in the general legal framework. Price-control and profit regulations, the competition between state enterprises are needed in the fields in which state enterprises operate monopolistically.
The state issues efficiency-valuating criteria and SOE supervising mechanism. Accounting, auditing, reporting, and information mechanisms shall be reformed. Business operation and enterprise finance shall be performed publicly.
About capital: enterprises can access and attract different sources to develop their businesses; they can actively treat the unused assets, and materials and goods that are accumulated stagnantly. The State has mechanism to create enough capital for enterprises in 5 years 2001-2005 basically. Fees of
using budget capital are not collected, accompanying by the conversion from capital providing to investment. State financial investment companies are experimentally set up to invest and manage state capital at enterprises. The State shall issue the Law on State capital uses invested in businesses.
Enterprises are sovereign in profit distribution and establishment of different funds extracted from profits in accordance with general framework. The state will have policies treating with assets created by loans and these loans are paid by depreciations and profits created by these assets in orientation of harmonizing different interests to encourage enterprises to invest for development.
About investment: The state increases the rights and responsibilities of SOE in investment decision, base on the approved development plans and strategies.
About technology renovation and modernization: enterprises are applied the preferential regulation applied to contributors in technology innovating that contributes practical efficiency to enterprises;
the costs are accounted into the production costs. The state has policies encouraging, helping enterprises in investing to innovate technologies.
About laborers and wages: enterprises decide to labors recruitment and are responsible for policies with these laborers without jobs created by enterprises. Enterprises are sovereign in paying wages and awards base on productivity and enterprises' operation efficiency.
About managers: enterprises actively choose and arrange managers base on examination; authorized state organizations issue decision appointing key managers of enterprises. The state has regulation to encourage spiritually and materially for them, accompanied by raising their responsibilities.
About auditing and checking: Enterprises shall be audited and checked to provide the legal bases of enterprises' financial situation. State administrative organizations shall have the periodically auditing and checking programs and pre-announce to enterprises. Legacy-protected organizations only inspect and check enterprises when there are signals of legal violation. These organizations are responsible for the results.
With regard to Public-utility State Enterprises
The State decides the organizational scale, financial policies toward public-utility enterprises base on their demand and tasks. The Mechanism of capital provides and task assignment shall be converted into mechanism of placing or bidding of public-utility goods and services. The state has preferential policies toward public-utility goods and services regardless of enterprise types and economic sectors. Labor, wages, and income management mechanism are carried out base on the quantity and quality of goods and services placed or assigned by the State. The accounting mechanism shall be applied to these enterprises.
Excess Labor and Non-performing Loans Solutions
The mechanisms and policies toward labor excesses created by the rearranging and restructuring SOE are supplemented. Enterprises shall check and set up the standard to determine needed laborers. Excess laborers are retrained, or finding new jobs while still receive their wages; if they cannot find new job, they can be applied the job-losing mechanism as prescribed by the Labor Code. Specific policies toward laborers voluntarily retire before defined age are supplemented and amended. The government will have money to implement the policies for excess laborers.
The Labor Code shall be amended and supplemented with orientation of applying the job-losing mechanism to the excess laborers at the time of assignment, sale, contracting and lease of SOEs. Social insurance policies shall urgently be supplemented; unemployment insurance policies shall be issued and be joint-contributed by the State, enterprises, and laborers.
Non-performing Debts
Government defines the methods to solve completely enterprises' non-performing debts borrowed from state budget and banks, accompanied by methods to prevent them from re-happening. The Debt and asset management companies shall be set up to treat the debt and unused assets, creating conditions to make the enterprises' finance healthy.
Reforming and Raising the Efficiency of General Corporations, and Setting up some Strong Economic Conglomerates.
General Corporations must have large chartered capital, the capital can be mobilized from different sources, of which the state capital is dominating; may be multi-industries, but they must have specialized industry. There are interdependence in terms of finance, production, and market between their members.
GCs must have advance technology and management, high productivity, high product quality, ability to compete in the domestic and international markets.
Vietnam should complete the rearrange existing GCs to make GCs: concentrate more resources in dominating important industries and domains of the economy; be the regular force in ensuring basic balances and macroeconomic stable; provide important and necessary products for the economy and exports, contribute largely to the state budget; be the core in boosting the economic growth and actively integration efficiently. General corporations shall operate in some specific industries (See Decision 58/2002/QD-TTg). Periodically according to the reality of economic growth, the list of industries will be adjusted. Existing GCs that do not meet these conditions will be rearranged.
Experimentally implement the “mother company-facilitate companies” model, in which the GCs invest in member enterprises that are one-member limited liability companies (corporations) or joint stock companies that the general corporation hold dominating shares. The general corporations can also invest in enterprises of other economic activities.
100%-state-capital general corporations must have Managing Board. Managing Board represented for the owner at general corporations, responsibility for receiving and keeping this capital intact. The Managing board’s rights and tasks are as follows: (i) Submit to the Prime Minister (or Ministers, presidents of People’s Committees of provinces and central-run cities) for approval: the plans of establishment, division, merge, ownership conversion, dissolution of member units; issuing standard regulations;
appoint and relieve, recommend and discipline the chairman and members of Managing Board, general director; approve the objectives, tasks, strategies, plans of medium- and long- term development of general corporations, and investment projects that are to be approved by the government; (ii) Decide the appointment of vice general directors, chief accountant, approve the director of member unit decided by the general director; decide and be responsible for the investment projects under their management base on approved strategies and plans, and for plans of management and business organization of general corporations; decide the after-tax profit distribution; (iii) check and supervise members’ directors or general directors in using and keeping intact and developing of capital, in implementing their obligations with the State, and in implementing the Managing Board’s resolutions.
The government defines the wage and award for the Managing Board depending on the operation efficiency of the general corporations.
Set up some strong economic conglomerates base on state general corporations, in which other economic sector can participate. These conglomerates operate in many industries, but they must have specialized industry at high level and have large dominating role in the economy; have very large scale in terms of capital; there are close relations among scientific technology, training, research and
development, and production; experimentally set up conglomerates in fields that have enough
conditions, advantages, and development ability to compete and integrate efficiently such as oil and gas, telecommunication, electronic, and construction.
Boosting SOE Equitization
The objectives of SOE equitisation are: creating new type of enterprises which have many owners, including most of labourers, efficiently using state capital and assets and mobilizing capital of the whole society for the purposes of investment in renovation of technology; and facilitating shareholding employees of enterprises and persons contributing capital to be real owners, changing the method of management, raising the supervision of society; ensuring the harmonization among interests of State, enterprises, and labourers. SOE equitisation cannot be SOE privatization.
Enterprises in which it is no longer necessary for the State to hold 100% of invested capital shall be subject to equitisation, regardless of their business results. Authorized state organizations, base on the rearranging and developing orientation of state enterprises and base on the situations of enterprises, decide the conversion to joint-stock companies, in which the State hold dominating shares, special shares, shares, or no shares.
The types of equitisation include issuing shares to mobilize additional capital; selling part of the value of enterprise; separating a part of the enterprises to equitize; or selling the whole value of the existing State owned capital. Equitisation of member units shall not adversely affect the business performance of remainders of enterprises.
The state shall have policies to reduce the difference in terms of preferred shares for laborers among equitised enterprises. Laborers shall hold preferred shares in a pre-determined period of time. Amending and supplementing the priority mechanism of selling shares to laborers to deeply attract them to
enterprises; sell an appropriate proportion of shares to outside buyers. Using a part of enterprises’ capital to form laborers’ shares, laborers would have the dividends but cannot draw the shares out of the enterprises. Expanding the sale of shares of processing enterprises in agriculture, forestry, and
aquaculture to material providers and producers. Encouraging equitised enterprises to be labor-intensive, and allowing transforming debts into joint-stock capital.
Amending the method of valuating the value of enterprises with regard to the market value; the value will include the value of land-use rights. Experimentally implement selling share through bidding and financial intermediaries.
Implement business assignment, contract, sale, lease, merge, dissolution, and declare bankrupt SOEs.
With enterprises of less than VND5 billions, the State does not have to hold 100% capital and they cannot be equitised, depending on the conditions of each enterprises authorized state organizations shall decide to sell, contract, assign, or lease. Assigned, sold enterprises are encouraged to converse into joint- stock companies. Other methods are merging, dissolving and declaring bankrupt with inefficient state enterprises that cannot apply these above-mentioned methods. Law on Enterprise bankruptcy should be
supplemented and amended, allowing the people decided the establishment of enterprises to propose to declare bankrupt. Boosting propagation, raising the laborers’ and society’s knowledge with the policies of business assignment, contract, sale, lease, merge, dissolution, and declare bankrupt SOEs.
Renovating, raising the management effectiveness and efficiency of State and owner organizations to SOEs.
The state management functions toward SOE should be clearly identified. State management functions toward SOE include: create and complete the legal framework, issue management policies and
mechanisms toward business and public-utility enterprises; set up the plans and train key managers, inspect and check the enterprises’ implementation of State’s policies and regulations.
Firmly finish the direct interference of state administrative organizations into the operation of state enterprises; clearly fix the economic administrative rights of State and business administrative rights of enterprises. State administrative organizations base on the legal framework and management
requirements to issue the system of legal documents to implement to state administrative functions to enterprises of all economic sectors, including SOEs.
Second is clearly fixing the rights of State organizations implementing the ownership functions to SOEs.
The government manages and implements the owner’s rights to SOEs. The owner have following rights:
establish, merge, divide, and transform ownership, dissolve enterprises; issue the standard regulations, appoint and relieve, recommend and discipline the key managers, decide the objectives, tasks, strategies, plans of medium- and long- term development of enterprises; approve investment projects; decide the after-tax profit distribution; (iii) check and supervise the implementation of objective and tasks assigned by the state and the efficiency of enterprises.
The government authorizes ministries, devolves specifically to People’s Committees of provinces and central-run cities, and Managing Board of General corporations to implement the State’s ownership rights to SOEs, ensuring that if there are any state capital, there will be organizations or individuals that are authorized to be the direct owner with clear tasks, rights, benefits, and obligations, regardless of central of local state enterprises.
About training and using the SOEs’ managers: The government defines the standards of key managers of enterprises, directs in building the system of training the directors of enterprises. The government defines the interests and obligations of SOE managers, satisfactory encourages them spiritually and materially based on their contributions, also defines clearly the disciplines of managers of inefficient SOEs due to subjective reasons.
The government has issued the Acting Program attached to Decision 183/2001/QD-TTg to implement this resolution. Main contents of this program are amending, supplementing mechanism and policies, and implementing these policies. From now to 2003, there will be a number of policies related to this resolution together with issuing and completing mechanism and policies related to implementation.
Key Programs of SOE Reforms