Draft law dictates SOE transparency

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The draft Law on Investment and Management of State Capital in Enterprises, currently under discussion by the National Assembly includes an entire chapter on the mechanisms that would ensure adequate supervision and transparency of the country’s state-owned enterprises (SOEs).

Under the draft, the National Assembly and other agencies representing SOE ownership will for the first time have the right to supervise SOE operations in terms of investments, usage of capital and assets, capital raising and usage, share issuances, non-core investments both locally and overseas, and debts. SOE business results, equity, profits, contributions to the state coffers and public service performance will also be supervised.

The supervision of such SOE operations are currently not stipulated in the existing Law on Enterprises and other relevant documents.

Also under the draft, SOEs will also have to submit quarterly, biannual and annual investment and business reports to agencies responsible for state stake ownership, financial agencies, and tax agencies.

In addition detailed operational information must be publicised on the websites of the firms and other related state agencies.

“The law would play a vital role in forcing SOEs to take responsibility for effectiveness of their investment capital usage,” the Central Institute for Economic Management’s acting head Nguyen Dinh Cung commented.

However, the National Assembly Economic Committee’s chairman Nguyen Van Giau said the law needed to “clearly separate the economic function of SOEs from their social and development tasks.”

“This is to boost SOE transparency and accountability and ensure that SOEs won’t be able to blame their losses on carrying out government tasks that aid the country’s development,” Giau said.

The committee also proposed that all SOEs would be audited like public companies and they would be compelled to publicise their business results just like other listed companies. This would strengthen public trust in their operations.

Bui Tat Thang, head of the Ministry of Planning and Investment’s Development Strategy Institute, also suggested that SOEs be forced to be listed on the stock market.

“The stock market is one of the best and most transparent ways of raising capital. If SOEs were listed, private investors would be able to judge the effectiveness of their operations,” he said.

The ineffective operation of many SOEs has made big headlines in the media, irritating the public and experts who have continuously demanded that the government clarify the scope of SOE operations.

PetroVietnam, EVN and VNPT were discovered to have numerous non-core investments in the property, insurance, banking and securities sectors. Their true finances are still a mystery.

For instance, the Government Inspectorate found that EVN had invested VND121.8 trillion ($5.8 billion) into non-core areas, massively exceeding the company’s chartered capital of VND76.7 trillion ($3.7 billion). Of this, the group put about VND2 trillion ($95 million) into finance, banking, insurance and securities.

VNPT was also found by the Government Inspectorate to have injected $157.1 million into 86 enterprises; 28 of those enterprises had a pitiful 3.16 per cent return on investment ratio. Another 20 enterprises and funds only broke-even or sustained losses.