Regional News
State-owned companies resist proposals for their sale or restructuring
After four years of economic instability, Vietnam is embarking on overhauls that some believe could be the most significant since since 1986, when government policies put an end to central planning and, eventually, turned the wartorn country into a tiger.
However, there is substantial skepticism that policy makers can fend off resistance to major change from state-owned companies and other interest groups, including private conglomerates, whose influence has risen sharply.
Months of heated discussion have produced a consensus thai Vietnam, racked by Asias worst inflation and other problems, needs to change tack, as it did 25 years ago when the Doi Moi, or renovation, policy took flight.
“Its not just talk anymore. This is serious business now,” said Dang Huy Dong, the vice minister of planning and investment. “Weve gone through careful analysis, painful analysis, to see where the shortcomings are and areas for improvement.”
It is far from certain, though, that the government will pursue overhauls that are broad enough and deep enough to fix the heavily indebted state banks and are inefficient state-owned enterprises like the Vietnam Shipbuilding Industry Group, known as Vinashin, which defaulted last year.
“The Vietnamese economy, once again, is at a crossroads,” said Le Dang Doanh, an economist who has advised current and former leaders.
And this time, in Mr. Doanh’s view, moving decisively down a path of change is “more difficult because it touches powerful interest groups that are operating behind the scenes.”
At a crossroads in the mid-1980s, when the economy was moribund, Vietnam engaged in a liberalization that un-leashed individuals and industries that made the country into a rising star. But in recent years, the star has burned out, and the country has evolved from one of Asia’s most promising economies into one of the most unstable.
The government hopes to shift its economic growth model away from reliance on cheap labor and capital, and has identified three areas of focus – banks, public spending and state-owned enterprises – but it is not expected to unveil a single, big-bang overhaul.
Proponents of major change hope it might untold the way Doi Moi did, as a process; Doi Moi was introduced in 1986 but did not accelerate until the early 1990s, and over time Vietnam transformed from a postwar basket case to a budding regional powerhouse.
Talk of change has advanced since the summer. Some proposals on the table have the potential to fundamental change the relationship between government and business and reshape the economy.
Government ministries have been told how to restructure themselves, and state-owned enterprises have been told to shrink holdings in noncore businesses.
In September, the Finance Ministry proposed that the government compel state-owned firms to return 50 percent of their profits to the state and reduce investments in noncore fields including banking, insurance and securities to 10 percent from as much as 30 percent.
Prime Minister Nguyen Tan Dung asked the Ministry of Planning and Investment to draft a proposal to separate ownership and management at the biggest state-owned enterprises, like the oil and natural gas group Petrovietnam.
“Its a strong plan in which state-owned companies have to follow O.E.C.D. standards of corporate governance,” said Pham Chi Lan, an economist who has been invited to talk with leaders, referring to the Organization for Economic Cooperation and Development. “Its also modeled on China in having clear criteria of productivity and technology advancement, instead of investment and revenue.”
Officials have signaled that the long-clogged pipeline of initial public offerings will reopen, and chunks of major state-owned enterprises not previously on the block will be sold, although the timing is unclear given poor market conditions.
The government is also considering selling state-owned enterprises in industries where private businesses and those with foreign investors are performing well, including seafood, textiles and coffee, while retaining ownership in transport, oil and natural gas, and power.
On Oct. 24, the prime minister ordered the creation of an advisory committee for monetary and fiscal policy.
Also, the State Bank of Vietnam is working to avert a banking crisis by or-chestrating consolidation of the crowded sector. Mr. Dung has asked for a plan for restructuring the commercial banking system.
Whether the initiatives bear fruit may hinge on how united the leadership is and how much interest groups like state-owned enterprises drag their feet.
There are optimists who believe Vietnam will make substantive changes that undercut what the World Bank calls “recurring and increasingly severe” economic instability.
Deepak Mishra, a World Bank economist who describes Vietnam as being uncharted territory, is encouraged by how much officials are talking about change.
“Nobody has seen anything like this in the recent past,” Mr. Mishra said. “My hunch is we’re not going to see massive clarity about the future course of action immediately, but after 5 or 10 years, when we look back, we may say, Yeah, there was a real change that started in 2011.”
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By: Tran Le Thuy and John Ruwitch
Source: The International Herald Tribune via Jakarta Post, Nov. 16, 2011
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