State firms to be kept on tighter leash

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The Ministry of Planning and Investment (MPI) has just released a draft decree on state economic groups and corporations on its website to seek comments which would replace the Decree 109/2009/ND-CP defining pilot industries for the establishment of state economic groups.

Currently, all parent companies of state groups and corporations were transferred into joint stock companies or limited companies. Meanwhile, Decree 109 only is applied for parent companies in the form of state-owned enterprises. Therefore, it is necessary to release a new decree to regulate for parent companies in form of joint stock or limited companies, said the proposal drafter.

The draft decree was born as many state groups and corporations operate inefficiently with a very big losses.

Under the government’s report on the financial conditions and business operation of 91 state-owned corporations and groups in 2011, 13 state-owned corporations and groups had cumulative losses of VND48.9 trillion ($2.3 billion) till December 31, 2011.

Therefore, the new decree is one of many measures of the government to tightly control and manage state groups and corporations, said the drafters.

Specifically, the draft regulates that the number of member-enterprise levels will be restricted at three levels instead of no limitation on the levels to establish new member enterprises under the parent companies as currently.

This regulation aimed at helping the state better manage and supervise state groups and corporations because in fact there is a situation that there are too many member-enterprise levels under state groups and corporations.

Another important point under the draft is the minimum charter capital for parents companies under a group and corporation. Accordingly, for a state group, the minimum charter capital for parent company is VND10 trillion ($480 million) if it is a one-member limited company and VND13.5 trillion ($649 million) if it is a joint stock company or a at least two member limited company.

For a state corporation, the minimum charter capital for parent company is VND5 trillion ($240 million) and VND7.7 trillion ($370.2 million), respectively.

The drafters also proposed to set up a board of supervisors for the parent companies under the state groups and corporation. In addition, the draft regulates in details about the obligation of information disclosure for state groups and corporations which will be responsible for the exactness of information to be public.