As highlighted in Decision No.91/TTg, the formation of GCs was not intended to create a monopoly situation.103 The threat to fair competition was, however, that they could actually strengthen their monopoly position, thus weakening competition.104 The concentration of the domestic market and/or the existence of trade barriers made it possible for some corporations, also called natural monopolies, to maintain their positions and benefit from them.105 In such specific sectors as telecommunications, the use of monopoly pricing remained common and was supported partly by state policy, as only a
99 Thuy, above n 17, 82-83; Tuan Vietnam, „Dieu hanh Tap doan Kinh te o Vietnam‟ [Regulating Economic Groups in Vietnam] <http://www.tuanvietnam.net/news/InTin.aspx?alias=tulieusuyngam&msgid=4089>.
100 Ibid.
101 Perkins and Anh, above n 67.
102 Tran Tien Cuong, „Viet Nam Se Co Nhung Tap doan Kinh te Manh?‟ [Will Vietnam Have Powerful Economic Groups?] <http://www.mof.gov.vn/Default.aspx?tabid=612&ItemID=20841>.
103 Decision No.91/TTg on 07/03/1994 on Pilot Establishment of Economic Groups art 2.
104 World Bank, „Vietnam: Economic Report on Industrialization and Industrial Policy‟ (Report No. 14645- VN, 1995) 108.
105 Arkadie and Mallon, above n 39, 132-135.
75 limited amount of competition in such sectors was allowed.106 In areas where administrative restrictions on international trade remained, such as the cement and steel sectors, only GCs enjoyed access to external markets and benefited from the import regime.107
The unclear division between the ownership and management functions of state corporations was widely criticized as a problem leading to a monopoly situation. State corporations tended to perform their business functions while conducting state management functions, such as producing sectoral and regional development plans, carrying out international relations and deciding prices. By virtue of this ambiguity, some corporations were able to institutionalize such privileges, imposing disadvantages on their competitors, arranging market divisions among member companies or creating price discrimination against competitors and customers.108
The existence of GCs diminished or removed competition between member and non- member companies. State corporations also restricted the competitive capacity of their member companies. This was because the business activities of member companies were often enforced under their „parent‟ corporation‟s guidance regarding development and investment directions, imposed targets and geographical arrangements. In some cases, they had to bear in part losses of other inefficient members.109 In those corporations, member companies seemed to complement each other rather than competing.110 Another concern was that the coordination of the operations of their member enterprises could exploit possible monopoly positions.111
In fact, competition among member firms was to increase, due to the lack of active participation in the management by members or of coordination of their strategies. The main activity of GCs was to examine the performance of the members through financial reports sent to head office a few times a year.112 The degree of competition was actually
106 Ibid.
107 World Bank, above n 104; Arkadie and Mallon, above n 39, 135.
108 Thuy, above n 17, 82; Hong, above n 20, 36.
109 Ibid 37.
110 Thuy, above n 17, 86; Fredrik Sjửholm, State Owned Enterprises and Equitization in Vietnam (2006)
<http://swopec.hhs.se/eijswp/papers/eijswp0228.pdf>.
111 Arkadie and Mallon, above n 39, 134.
112 Mitsui, above n 62, 148.
76 higher among members in terms of price in some sectors.113
Debates were also focused on constraints to competition in infrastructure industries114 and the exploitation of pricing policy.115 State corporations holding a „natural monopoly‟ in specific industries restricted investment from both the non state sector and foreign investors. Not only did they become the only providers of products and services in specific areas, they could eliminate competition by establishing a closed network covering all phases of business performance that excluded participation of other companies. With a monopoly position, they could impose monopoly prices which were higher than those in neighbouring countries, or than people could readily afford. Holding a monopoly in purchases allowed corporations to impose a low pricing scheme, while those holding a monopoly in sales could impose a high pricing scheme or maintain sale prices.
GCs were able to influence price control because they maintained their relationship with the government.116 Administrative barriers in the form of legislation became a major obstacle to fair competition and brought a further advantage to them. They could propose to the government the imposition of protective policies against imports or subsidies such as export subsidies and preferential loans for price stabilization.
At present, there have been some improvements due to the presence of new competing enterprises in the same areas, such as telecommunication and aviation since early 1990s117. However, the monopoly situation has not improved much because of the inadequate scale of economies of new enterprises and the preference given to state
113 This can be seen in competition among member companies within the Sugar Cane Corporation and in the Construction Corporation. See Sjửholm, above n 110.
114 Examples of Vietnam Posts and Telecommunication; Vietnam Airlines or Vietnam Electricity Corporations are good demonstrations for this situation. See Hong, above n 20, 37.
115 Numerous examples can be found in the cases of telecommunications, electricity, cement, steel, petroleum. Price discrimination was applied for numerous products and services and there were other practices abusing the monopoly position, such as constraints in business and refusal to deal, which were employed commonly in insurance, public transportation and the purchase of raw materials.
116 Le Phu Cuong, Monopoly Situation in Vietnam (2003)
<http://www.competitionlaw.cn/upload/05070113295626.pdf>.
117 For example, competition in telecommunication services was open with the participation of new companies such as Saigon Postel Corporation (1995); Viettel Telecom (2004). Similarly, the launch of Pacific Airlines in 1991 was a breakthrough for the removal of Vietnam Airlines‟ monopoly in aviation area.
77 enterprises.118 In general, GCs are said to have a bad effect on competition rather than a positive one.119