Efficiency and transparency are key for SOE governance
Inefficient monitoring and supervising of state representative are some of the key reasons behind violations in managing and utilizing state capital and assets in SOEs, stated a recent conclusion of the National Assembly Supervisory Delegation.
The process of state capital and assets managements at state-owned enterprises (SOEs) remains several shortcomings, requiring higher efficiency and transparency in SOE governance, according to a recently-published report by the Central Institute for Economic Management (CIEM).
Overview of the workshop. Source: Nguyen Tung.
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"In recent years, there have been improvements in the state sector, however, from the financial aspect, efficiency in SOE's business performance is declining," said Pham Duc Trung, head of CIEM's Corporate Development and Reform Department at a workshop reviewing the monitoring mechanism of state capital representative on July 19.
"The sector's return on equity (ROE) and return on asset (ROA) decreased by 39% and 30% in the 2011 - 2016 period," Trung added.
He referred to a recent conclusion of the National Assembly Supervisory Delegation stating that inefficient monitoring and supervising of state representative are some of the key reasons behind violations in managing and utilizing state capital and assets in SOEs.
From a legal standpoint, according to Trung, there is no government agency with full authority and sufficient capabilities to monitor and supervise SOEs in an efficient and comprehensive manner.
Trung pointed to the fact that each ministry is responsible for a certain field, leading to difficulties in the continuity and coordination of the supervision process.
Moreover, the lack of information on state capital and assets invested in SOEs in the economy is causing difficulties for state capital representatives.
Echoing Trung's view, economist Pham Chi Lan stressed state representatives and related ministries should bear the responsibility for the lack of information from SOEs, while there are no regulations to ensure the agency that represents the ownership is held accountable for improving SOE performance.
Senior economist Tran Dinh Thien stated there should be a clear protocol to deal with SOEs not disclosing information in accordance to the law, as "data management and transparency are critical to improve SOE governance."
Consequently, the state capital representative must enforce requirements that SOEs publish annual and financial reports with detailed information, including audit statements from independent auditors, Thien added.
According to Raymond Mallon, Aus4Reform's representative, society has a right to have access to information on the performance of SOEs, thus, the enforcement of strong performance monitoring and reporting system are essential.
Steps moving forward
On how to improve SOEs efficiency, Lan said the government should consider removing the function of ministries and ministerial-level agencies to represent the state ownership in enterprises. According to Lan, the move would not lower their role but is expected to help them improve the effectiveness of their function of state management of SOEs.
Moreover, SOE equitization should be an option moving forward, Lan added, as the current large number of SOEs makes efficient monitoring impossible.
Tran Dinh Cung, director of CIEM , stated the establishment of the State Capital Management Committee is a step toward market-mechanism, however, Cung warned there should be an appropriate mechanism for the committee to fulfil its role.
Additionally, Cung said the committee should not be seen as an agency administering SOEs, but it should manage SOEs to generate commercial returns on investment.
The goal of improving mechanism for exercising state ownership rights in SOEs, said Mallon, is higher efficiency of resources in the public sector, corruption reduction and an improvement in national economic competitiveness.
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