Today, they stand on the brink of a new transformation, aiming to become key players in the digital economy. However, amid these expectations, there are also numerous concerns.
Addressing Loss-Making Projects
The year 2018 marked a pivotal moment for SOEs when 19 of them, covering a wide array of sectors, came under the purview of the Committee for Management of State Capital at Enterprises (CMSC). Among these SOEs, there were both success stories and challenges. Some were consistently losing money, saddled with long-standing "debt mountains" stemming from unresolved projects. The "12 major projects" with losses of SOEs became a topic of intense discussion in meetings of the National Assembly, the Government, and the media. The Politburo convened to address this issue, directing CMSC to devise immediate plans for handling these loss-making projects.
Fast forward five years (2018-2023), and there have been notable improvements in the production and business activities of these 19 SOEs. By the end of 2022, as per the financial statements of the SOEs, their total consolidated equity increased from VND 1,055,618 billion to VND 1,154,600 billion, while total consolidated assets grew from VND 2,359,693 billion to VND 2,490,832 billion. Moreover, these SOEs achieved annual production and business growth targets. In 2022 alone, their total consolidated revenue reached VND 1,871,050 billion, accounting for 20% of the country's GDP (an increase of 0.6% compared to 2018).
Of particular note, two enterprises, the Vietnam Oil and Gas Group and the Vietnam Coal and Mineral Industry Group, achieved record-breaking revenues. Their total consolidated pre-tax profit stood at VND 103,309 billion, and they contributed VND 227,990 billion to the consolidated state budget. Regarding the 12 loss-making projects, eight of them now have solutions in place, with the responsibility for implementation assigned to the respective businesses. Over the five years under CMSC's guidance, these SOEs have approved, executed, and completed investments in 185 Group A projects and 455 Group B projects, with a total estimated investment value of VND 770,000 billion.
According to a recent CMSC report, eight out of 12 loss-making and slow-moving projects within the Industry and Trade sector have been addressed. Four projects, including the phase 2 production expansion project of the Thai Nguyen Iron and Steel Factory, the Quy Xa mine iron ore exploitation and sorting project, the Lao Cai iron and steel factory project, and Dung Quat Shipbuilding Industry One Member Limited Liability Company, are still pending solutions. CMSC has submitted three proposals to the Prime Minister and is awaiting a report to the Politburo on these matters.
Hopes and Concerns
To leverage the pioneering role of SOEs, the Ministry of Planning and Investment is developing an ambitious SOE Project. This initiative focuses on selecting economically significant corporations with technological and innovation capabilities to spearhead investments in critical new fields and industries. The selection criteria prioritize financial strength, substantial scale, a strong brand, a quality management system, and a penchant for technology and innovation. Four industry groups from various economic sectors have been chosen to implement this project, encompassing high-tech industry, renewable energy, banking and finance, and infrastructure.
Nonetheless, concerns persist. There was a period during which SOEs were granted greater autonomy to become "steel punches," but they fell short of their goals and encountered crises. To date, internal structural limitations within SOEs remain unresolved. These enterprises have yet to fully harness the capital resources and assets assigned by the State to expedite investment projects and maintain quality control. Investment capital allocation has not been strategically focused on industries and fields that could enhance the economy's competitiveness. State-owned enterprises still lack products or services in high-tech or core technology sectors that can drive economic structural transformation. Project management and execution capacities remain weak across various stages, from meticulous project preparation and contractor selection to investment management, organization, operation, and maintenance.
Phạm Văn Sơn, Director of the CMSC General Department, cites one reason for the inefficient use of state capital as the existence of overlapping mechanisms and policies. For instance, CMSC and SOEs currently lack the authority and functionality to coordinate capital resources among themselves. This situation results in some businesses having excess capital with no clear investment plans, while others lack the necessary capital for their business and production needs, thereby squandering valuable resources held by SOEs.
