The Decline of State-Owned Enterprises in Vietnam

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HANOI – The number of state-owned enterprises (SOEs) operating in Vietnam has fallen by 50 percent since 2000, according to figures released by the General Statistics Office’s Industrial Statistics Department. The department reported a total of 3,135 SOEs in 2013, down from nearly 5,800 in 2000.

This decline is partly the result of measures implemented by the government of Vietnam to return SOEs to the country’s private sector in the hopes of garnering greater domestic and international investment into the country’s economy.

Equity shareholders now own half of the companies that fell off the list of state-owned enterprises over the last 13 years, with the remaining half now under private management.

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The push to privatize SOEs has been met with positive results as nearly 80 percent of privatized firms reported earnings growth following their transition. An astounding 40 percent reported growth of over 10 percent as a result of their equitization.

During his year-end speech at the Vietnam Development Partnership Forum, Prime Minister Nguyen Tan Dung reaffirmed the country’s commitment to continue efforts aimed at the privatization of Vietnam’s large SOE sector. He emphasized the importance of private and international investment to the country’s continued economic development and outlined plans to equitize another 500 SOEs in 2014.

Investors began to worry earlier this year when revisions to the country’s constitution were proposed that would potentially result in greater control of SOEs over Vietnam’s economy. The prime minister sought to allay these fears during his speech, but also stressed the continuing importance of SOEs to the country’s efficient economic management.

Shareholders have also complained that equitized SOEs still lack appropriate corporate governance protocols and continue to operate under the mandate of state-owned enterprises.

“Vietnam still lacks a vibrant private sector and supporting industries, due to the near-monopoly of SOEs in many sectors of the economy. By signing up for the TPP (Trans-Pacific Partnership), Vietnamese economic leaders recognized they cannot continue to follow the Chinese growth model indefinitely,” said Kyle Spring of the Center for Strategic and International Studies. “What remains to be seen is how far they will go in embracing reforms and how soon they will level the playing field between SOEs and the private sector,” he further commented.

With these concerns in mind, Prime Minister Dung released a statement for the New Year, emphasizing the National Assembly’s commitment to improved economic growth in 2014 through the reduction of obstacles to create favorable conditions for business operations.

“Our tasks are huge, while difficulties and challenges are great. However, this is a chance for us to speed up stronger reforms,” said PM Dung.

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