State group supervision won’t restrict business

A new regulation on the establishment and operation of State-owned economic groups is expected to increase business transparency and ensure the groups’ contributions to the national economy. Head of the Research Board for Enterprise Development under the Central Institute for Economic Management (CIEM) Tran Tien Cuong spoke to Viet Nam News’s reporter Ha Phuong about this issue.

Determining basic criteria for an economic group is said to be difficult. In your opinion, what should these criteria be?

We are working on this issue. Personally, I think that at the very least, the business sectors of an economic group should be named, as with the eight pilot groups: Vinashin (shipbuilding), PetroVietnam (gas and oil), Vinacomin (coal and minerals), Vinatex (garments and textiles), Viet Nam Rubber Corp, Vicofa (coffee and cacao), VNPT (communications) and Bao Viet Group (insurance) and Electricity of Viet Nam (EVN).

Moreover, an economic group should run a major business to help boost development of other business sectors.

What is the definition of a "major business sector"?

Major business sectors are sectors in which the State still holds a ruling stake, or sectors which play important roles in national security.

CIEM proposed a 21-sector list for major economic groups: telecommunications, information and technology, postal communications, shipbuilding, maritime transportation, textiles and garments, electricity, oil and gas exploration and distribution, petrol and oil, services coal and minerals, rubber, coffee and cacao, finance, insurance, food, aviation, cement, tobacco and cigars, paper and pulp, fertiliser and chemicals, and state capital investment.

CIEM proposed that related business must not affect the performance and development of the major business; and revenue from related businesses must be reinvested in the major business. If an economic group directly or indirectly via another subsidiary invests in sectors risky to core business performance, the parent company must get the Prime Minister’s approval.

Another essential aspect of the regulation is the supervision of economic groups. Some groups have suggested that supervision will restrict space for business operations, instead of creating favourable conditions. What do you think?

The regulation aims to guide corporations on how to legally and effectively conduct business. It specifies ownership, business implementation and rights. There is no limitation or tightening here.

The supervision will be conducted by State ownership representatives at the economic groups.

The representatives will have to monitor group businesses and then report to the Government and the Prime Minister.

All issues related to business strategy, which are discussed in shareholder meetings, directors board meetings and executive board meetings, must be submitted to the Prime Minister before a vote.

The Ministry of Planning and Investment will have to monitor business expansion of economic groups, and the Ministry of Finance will monitor the financial businesses of parent companies and subsidiaries.

What challenges does the regulation face?

There are some technical difficulties, like establishment, capital and labour source criteria. We have to review some specific regulations in order to bring them in line with existing laws. Major businesses are also being thoroughly considered.

By 2010, State enterprises are expected to have completed the equitisation process. What management mechanism will these enterprises need to run businesses?

I think at that time, we will have to build additional legal regulations that guide ownership of State-owned enterprises. Regulations related to this issue are presently part of other documents. — VNS