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Improve governance efficiency in SOEs

The seminar on September 29.

State-owned enterprises play key role in the economy

According to Dr. Nguyen Nhu Quynh, Director of the Institute of Financial Strategy and Policy, currently, State-owned enterprises (SOEs) still play an important role in the economies of countries inside and outside the Organization for Economic Co-operation and Development (OECD), especially in developing countries such as Vietnam. SOEs still account for a key part of GDP, capital and labor force in these countries.

The SOE sector has contributed more than 29% of the country’s GDP, and attracted about 0.7 million employees, showing its key role in a number of sectors and creating significant revenue for the State budget. At the same time, contributing to the process of economic restructuring associated with the renewal of the growth model. The operation of SOEs, especially economic groups and corporations, has a great influence on the development of a number of sectors and fields of the economy.

Mr. Dang Quyet Tien, Director of the Corporate Finance Department, Ministry of Finance, said that in Vietnam, the legal framework for corporate governance in SOEs has been built and gradually completed. The legal framework and regulations on corporate governance have been rapidly developed over the past decade.

The main laws on corporate governance in Vietnam are the Law on Enterprise 2020 and the Law on Securities 2019 which provide regulations on corporate governance for listed companies and public companies. The Law on Accounting 2015 and the Law on Independent Auditing 2011 provide a legal framework for financial reporting, accounting and auditing in the corporate sector in Vietnam.

In addition, other laws (Law on Investment 2005, Law on Competition 2018, Law on Credit Institutions 2010 and Law on Insurance Business 2010) further stipulate the legal framework of corporate governance. SOEs must also comply with anti-corruption, bankruptcy, trade, competition, construction, labor, procurement and tax laws.

The Law on Enterprise 2020 has brought business practices in Vietnam closer to international good practices. Regulations on corporate governance for state-owned enterprises are provided in the Law on Enterprise. However, the Law on Management and use of state capital invested in production and business at enterprises also regulate corporate governance for the enterprises.

Perfecting legal framework

The legal framework for corporate governance of SOEs has improved significantly over the years. Earlier, the legal framework still focused on the framework of state capital management. Recently, these regulations focused on ensuring transparency and accountability of the public sector. The current legal framework considers SOEs as a tool to regulate the economy and does not really recognize the autonomy and self-responsibility of SOEs.

With the goal of completing the legal framework on corporate governance in SOEs in line with international practices and the direction of the Party and State, the amendment of Law No. 69/2014/QH13 in the near future is an opportunity for amending and supplementing mechanisms, policies and legal regulations on corporate governance; towards the application of international practices on corporate governance in actual conditions in Vietnam; improving investor confidence; strengthening protection of interests of owners, investors and related parties; ensuring the transparency in implementing corporate governance with a high level of professionalism and efficiency.

In the draft Law amending Law No. 69/2014/QH13, the Ministry of Finance is submitting to the Government four groups of regulations on management and use of state capital invested in enterprises, including regulations on investment of state capital in the enterprise; regulations on restructuring state capital in enterprises; policies on management of state capital invested in enterprises; policies on rights and responsibilities of the owner's representative agency. The policy development aims to strengthen corporate governance at SOEs instead of focusing on state capital management at present.

Assoc. Prof. Dr. Ho Sy Hung, Vice Chairman of the Committee for Management of State Capital at Enterprises, said that in the near future, the SOE sector must increase investment and innovation and apply science and technology, improve operational efficiency to implement the leading role; coordinate with the domestic private sector to build an independent and self-reliant economy towards the goal of becoming a powerful and prosperous country by 2045 as set by the 13th Party Congress.

In order to accomplish the task, the goal of SOE governance in the near future is 100% of economic groups and state-owned corporations apply governance, implementing corporate governance in accordance with OECD governance principles, improving corporate governance efficiency to enhance the performance of SOEs, promoting advantages, overcoming limitations, and taking advantage of development opportunities to show the role and position of SOEs in the economy.