The Ministry of Finance and the World Bank jointly organized the workshop “The Law no. 69 on the management and use of State capital invested in productive and commercial activities of enterprises: Review of five-year implementation and orientation for revision and/or supplementation” on April 7, 2021 in Hanoi. The objective of the workshop is to review and evaluate the implementation of the Law no. 69 and to consult experts, owner-representing agencies and a number of economic groups, large corporations on orientation for revision and/or supplementation.
Mr. Đặng Quyết Tiến, Director General of the Corporate Finance Department (Ministry of Finance) delived the opening remarks
Among the participants were representatives from the National Assembly, the Government’s Office, line ministries, departments of the Ministry of Finance, provincial people’s committees, the Committee for management of State capital at enterprises, economic groups, state corporations and the World Bank.
In his opening remarks, Mr. Đặng Quyết Tiến, Director General of the Corporate Finance Department, the Ministry of Finance said that the National Assembly issued the Law on the management and use of State capital invested in productive and commercial activities of enterprises (Law no. 69/2014/QH13), which took effective in July 1, 2015.
After five years of enforcement, Law no. 69/2014/QH13 has created a legal framework for the investment of State capital in productive and commercial activities of enterprises. Policies and mechanisms for the management and use of State capital invested in State-owned enterprises (SoEs) have been synchronized to meet the needs of reform and international integration. The legal environment is therefore sufficient and stable for the management and use of State capital and assets in State agencies and enterprises. In addition, the policies and mechanisms have ensured the protection and promotion of the autonomy and self-accountability of enterprises, as well as the State’s enhancement of monitoring and evaluation in the management and use of State capital in productive and commercial activities of enterprises.
Several changes in related legislation and policies have taken place since then. In addition, the enforcement of Law no. 69 and its guiding documents have revealed a number of shortcomings in how to define State capital invested in enterprises; the decision-making power on project investment, construction and procurement of fixed assets; the decision-making power on investment outside the enterprise; regulations on investment outside the country; methods of capital transfer and after-tax distribution; principles of after-tax distribution in SoEs; capital preservation and growth; the restructuring of State capital in enterprises; the management and use of the money collected from equitization and divestment; rights, responsibilities of and methods of managing and supervising State ownership representatives, the group of State ownership representatives, owner-representing agencies, the group of owner-representing agencies; the management of the SoE over the subsidiary company it owns all the charter capital.
Participants in the workshop
“In order to improve the legal framework for the management and use of State capital invested in productive and commercial activities, in this workshop, the Ministry of Finance would like to hear your views, analysis and recommendations, which will help us find out where we should make changes and breakthroughs,” Mr. Tiến emphasized.
The Director General suggested a number of topics to be discussed. The first is the group of regulations on State capital: definition; viewpoints on State capital invested in enterprises before, during and after the investment; rights to management, use and decision making of State capital in enterprises.
The second is the group of regulations on the SoEs that the State owned all of their charter capital or stocks, and limited liability companies or join stock companies that the State owned more than 50 percent of their charter capital or stocks. SoEs are an important material force of the State economy. They concentrate on key and essential areas; defence and security; and other areas enterprises from other economic sectors don’t invest in.
The third is the group of regulations that strengthen the management of SoEs which operate under the market mechanism and whose key performance indicator is economic performance. These SoEs are given autonomy and self-accountability. They compete fair and square with other economic sectors in compliance with the law. They are also required to ensure transparency and accountability. The duties and responsibilities of SoEs that deliver common goods and services are separated from those of SoEs that produce public goods and services. The State sees itself as an investor and doesn’t use direct administrative measures to intervene in the operation and management of the enterprises. It implements the rights of an investor through its representatives in the enterprises.
The fourth is the group of regulations on the restructing and reform of enterprises that have State capital and operate under the market mechanism. The restructing and reform of these SoEs is a constant and continuous process that needs a suitable implementation method and road map. The direction is to enhance the restructuring of enterprises that have State capital by equitization and sale of stocks in enterprises that the State no longer sees the rationale for owing more than 50 percent of stocks, including enterprises with good financial performance. At the same time, ineffective SoEs will be filtered out, even by letting them go bankrupt.
The fifth is the group of regulations which try to improve the effectiveness of management, supervision, inspection and control over the operations of enterprises that have State capital, and to prevent loss and waste of State capital. The governance of the State ownership needs to be separated from administrative and regulatory functions of the State as well as from business administration functions in enterprises that have State capital. The rights and responsibilities of the manager and the direct representative of the owner need to be clearly identified on a contract basis in order to avoid confusion between the role of the business manager and the rights of the owner of the SOE. In addition, more attention and efforts need to be paid to capacity building in corporate governance and business ethics for the leadership of enterprises that have State capital.
Dr. Nguyễn Đình Cung, Former Director of the Central Institute for Economic Management gave his presentation at the workshop
Experts presented their independent review of the implementation of the Law no. 69 and a number of recommendations for revision and/or sumplementation at the workshop. Development partners such as the World Bank, the Swiss State Secretariat for Economic Affairs (SECO) as well as German and Swiss experts also provided their inputs and comments.
After the presentations, participants discussed candidly and openly issues that pertain the management of State capital invested in enterprises. They all agreed that the implementation of the Law no. 69 in recent years have achieved positive results. Nevertheless, there are bottlenecks and shortcomings that need to be addressed. For instance, State capital should be defined along the capital flow. Accordingly, after State capital was invested in enterprises, it shoud become the capital of the enterprises and be managed, used and decided by the enterprises. The State should only play the role of the owner of the contributed capital and corresponding stocks.
International experts participated in the hybrid conference.
In addition, the roles of owner-representing agencies should be clarified. After the investment, owner-representing agencies become the owner of the contributed capital/stocks and have similar rights and responsibilities to other investors and shareholders in the enterprises. They should not directly intervene in productive and commercial activities of the enterprises. All activities should be conducted by the executive board. The governance of the State ownership should be separated from business administration. On the other hand, the measurement of State capital investment efficiency should follow principles of a market economy, according to which the measurement should be based on annual value-added of the capital investment, dividends and distributed profits.
In particular, business administration at SoEs needs to be strengthened and reformed toward more transparency and accountability of the leadership, application of international good practices, better external and internal monitoring and evaluation of performance.
The workshop on Law no. 69 on the management and use of State capital invested in productive and commercial activities of enterprises: Review of five-year implementation and orientation for revision and/or supplementation” is one of the activities under Subproject 11A of the Vietnam Public Financial Management Analytical and Advisory Assistance Program (in short: AAA program). The preparatory work of revision and/or supplementation of the Law no. 69 has received the support from the AAA program, which is co-financed by SECO and Global Affairs Canada (GAC) and entrusted through the World Bank.