Building a flexible mechanism and "reinforcing" administration for state-owned enterprises

Deputy Minister of Finance Cao Anh Tuan, Standing Deputy Head of the Drafting Committee, made a speech

SOEs need flexible and responsive operating mechanisms

On June 12, the Minister of Finance issued Decision No. 1337/QD-BTC on establishing a Drafting Committee and Editorial Team to develop the draft Law on the Management and Investment of State Capital at Enterprises (referred to as Darft Law).

Speaking at the Conference, the Drafting Board gave their opinions on the draft Law organized by the Department of Corporate Finance (Ministry of Finance) on June 20, Deputy Minister of Finance Cao Anh Tuan, Permanent Deputy Director of the Drafting Board said that the drafting agency and the Editorial Board have closely followed the purpose, guiding viewpoints and concretized the content of the six policy groups in the dossier proposing the draft Law, so the draft Law consists of 9 Chapters and 92 Articles.

However, Deputy Minister Cao Anh Tuan emphasized that there are still many procedures before the draft Law is submitted to the Government for approval and the Financial and Budget Committee of the National Assembly for examination. To ensure the quality of the Law drafting dossier, the Deputy Minister expressed his desire for the members of the Drafting Board and the Editorial Board to participate and contribute specific comments so that the drafting agency and the Editorial Board can absorb and complete them soon and get feedback from ministries, sectors, enterprises, and related units.

Sharing more at the Conference, Mr. Nguyen Ngoc Canh, Vice Chairman of the State Capital Management Committee at Enterprises, said that the reality of state-owned enterprise (SOE) operations showed many difficulties in production and business activities. "At many meetings, many SOE leaders said that the private sector looks at the resources of SOEs, while SOEs look at the flexible and sensitive operating mechanism of the private sector. Therefore, the issues that need to be addressed in the draft Law are to build a legal corridor to remove bottlenecks and free up resources for SOEs," Mr. Nguyen Ngoc Canh emphasized.

Specifically, about the draft Law, Mr. Bui Tuan Minh, Director of the Department of Corporate Finance, member of the Drafting Board, and Head of the Editorial Board, said that the Government has approved and reported to the National Assembly the scope of the Law's regulation: "This Law regulates the management and investment of state capital in enterprises; the arrangement and restructuring of state capital invested in enterprises; inspection and supervision of the management and investment of state capital in enterprises".

The above regulations aim to implement the principle that the State does not directly manage the legal entity of enterprises, the State only manages the investment capital flow in enterprises, and enterprises operate by the provisions of the enterprise law; state capital after being invested in enterprises is determined to be the assets/capital of the legal entity of enterprises... On that basis, the State clearly defines its authority and responsibility for the state capital invested in enterprises, the State is the investment owner and does not intervene in the administrative management of the production and business activities of enterprises.

The Drafting Board gave their opinions on the draft Law on Management and Investment of State Capital in Enterprises.

Regarding the subjects of application, the draft Law includes agencies representing the capital ownership and capital ownership representatives; enterprises with state capital investment include both enterprises with direct state capital investment and enterprises with other forms of state capital investment; agencies, organizations, and individuals related to the scope of this Law.

Specifically, based on research and practical experience of enterprise operation, Mr. Bui Tuan Minh said that the subject of "enterprises with other forms of state capital investment" is defined as enterprises with capital invested by enterprises with direct state capital investment to replace the definition of "enterprises with other forms of state capital investment" in the current Law, which is "enterprises with capital investment of more than 50% of the charter capital of an enterprise with 100% direct state capital investment".

Regarding the rate of setting up the Enterprise Development Investment Fund from after-tax profit, the Director of the Department of Corporate Finance said that the Ministry of Finance proposes 3 options: a maximum of 50%, 80%, and 100% of after-tax profit. The Ministry of Finance proposes to submit to the Government for consideration and a decision to implement according to Option 2, which is to set aside a maximum of 80% of after-tax profit.

“Reinforce” the administration quality

During the conference, representatives from various state-owned enterprises (SOEs) and agencies expressed appreciation for the draft Law's proposed changes. Mr. Nguyen Van Mau, a member of the Board of Members of the Vietnam Oil and Gas Group (PetroVietnam), stated that the draft Law adheres to fundamental "revolutionary" principles for thoroughly implementing the functions and responsibilities of SOEs as well as owners and representatives of state capital in enterprises. Additionally, the draft Law expands certain rights and increases the autonomy of enterprises in areas such as capital contribution, wage principles, and capital structure.

However, Mr. Mau also raised some concerns, such as the need to carefully review the impact of applying the Law to "enterprises with other forms of state capital investment" on the operating mechanisms and boards of directors of enterprises at level 1 and level 2.

Mr. Nguyen Xuan Nam, Deputy General Director of the Electricity Group of Vietnam (EVN), expressed concerns about the enterprise classification and evaluation provisions, given the large volume of work and market-driven nature of SOEs. He emphasized the need for a comprehensive assessment of enterprises' business activities and social responsibilities.

Regarding the establishment of the Investment Development Fund at enterprises, EVN's representative advocated for adopting Option 3 to balance capital allocation for charter capital increase, fund allocation, and dividend distribution.

Overall, Mr. Dau Anh Tuan, Deputy General Secretary and Head of the Legal Department of the Vietnam Chamber of Commerce and Industry (VCCI), commended the draft Law's clear approach to empowering SOEs through management based on plans and strategies. However, he highlighted the unique characteristics of SOEs compared to private enterprises. SOEs must not only ensure efficient capital utilization but also fulfill political, social, security, and defense objectives. Therefore, the draft Law should further strengthen corporate governance practices similar to those applied to listed companies.