No sooner had the case of Vinashin, the Vietnam Shipbuilding Industry Corporation, whose former chairman was sentenced 20 years in jail in late March, finished than another state-owned enterprise (SOE), this time Vinalines, the Vietnam National Shipping Lines, was found committing financial wrongdoings reaching tens of millions of US dollars.
The Vinalines Global ship, built in 1994 in Japan, was purchased by Vinalines in 2008, Photo: Marine traffic
There are many similarities between these two SOE giants: overinvesting in non-core sectors, investing ineffectively, buying old equipment, or incurring massive losses. And in both cases, things were only unearthed after the intervention of the State Inspectorate of Vietnam.
The ministries, more than anyone else, should have learned from the case of Vinashin to better manage the corporations or groups under their supervision. It has been two years since Vinashin’s wrongdoings were discovered, but there have been many other SOEs found with similar faults.
They include the Electricity Group of Vietnam (EVN), or the Vietnam National Coal and Mineral Industries Group (Vinacomin), and neither of the cases were detected by the ministries managing them but, instead, bythe state inspectorate.
This means it is time the management of the ministries over the SOEs operating in their sectors be revised.
Currently, many ministries are joining hands with the government to manage the SOEs. However, except for the Ministry of Finance, most of the other ministries do not have an agency specialized in this task. Some officials are not knowledgeable about business but are assigned to manage businesses.
Meanwhile, the SOEs’ operations are extremely complex and extended, with a huge number of assets, personnel, and subsidiaries.
The ministries mostly “manage” the SEOs based merely on reports made by the latter, and by assigning some of their officials to sit in on the board of directors.
From the Vinashin experience, it proves that the SOEs are totally capable of composing false reports, or even not making any, while those assigned to supervise them fail to fulfill their duties.
Despite past experiences, such loose management over SOEs seems unchanged since the case of Vinashin.
More surprisingly, before the wrongdoings of Vinalines were unearthed, the Ministry of Transport, its governing agency, even proposed to put another VND100 trillion (US$4.8 billion) in to the loss-making shipping line.
The ministries are seemingly not aware of their responsibility, and have inadequate abilities to manage the SOEs.
Ways to avoid future problems
In order to prevent other cases like Vinalines and Vinashin from happening, the first thing that should be done is to set regulations that require the SOEs to be more transparent and increase their responsibility in reporting their operations.
This will not only help the government agencies strengthen supervision on the SOEs, but also make the latter more responsible in reporting their operations.
More importantly, the transparency in SOEs will enable the public to keep track of their operations, and thus will allow them speak out in case the SOEs show sign of poor effectiveness.
This will help prevent financial wrongdoings, and as a result the public will no longer be shocked to learn that the SOEs have consumed huge sums worth trillions of dong in their unprofitable investments.
In the longer term, the government should boost the (spread of equity?) and divestment of the government’s capital in SOEs where government management is unnecessary. Also, SOEs operating in sectors where the government has no need to join should be sold. Privately-owned enterprises, as proved by reality, can operate in such sectors much more effectively.
Therefore, to increase the transparency and effectiveness of the SOEs, the government should be determined to boost the divestment from these SOEs to attract more contributions from the public sector.
It is stipulated that SOEs divest totally from non-core sectors by 2015. From the lessons of Vinashin and Vinalines, the government capital should be divested from sectors where private replacements can effectively operate.
Mobilization the investment in SOEs, and reducing the participation of them in unnecessary sectors are the basic and most effective solutions to avoiding the losses the SOEs have made.
Source: Pham Chi Lan/ Tuoitrenews
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» $19 mln corruption case at Vinalines on trial
» Vinashin bankruptcy means wasted land in Haiphong
» Former Vinalines head faces trial for corruption
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