Vietnam: Launch of the Commission for the Management of State Capital at Enterprises

On 1 October, the Commission for the Management of State Capital at Enterprises, a new government agency, was officially launched. The Commission, chaired by Nguyen Hoang Anh, has taken control of 19 state-owned enterprises with further additions likely.

 

Analysis

The Vietnamese government has a long-term objective (since the 90s) of partial privatization and full divestment of stakes in its state-owned enterprises, many of which are plagued by operational inefficiencies and corruption. This process has received greater impetus since 2011. Prime Minster Nguyen Xuan Phuc has commented that increasing Vietnam’s competitiveness is underpinned by increasing efficiency in its state-owned enterprises. The prime minister had called for 85 SOEs to be partially divested in 2018. As of November, sources report that only 12 have been equitized (partially privatized). Over 2017 and 2018 approximately ten percent of the required firms have been divested meaning the process is acutely behind schedule.

In addition to competitiveness, the equitization and divestment plan is partly required to meet obligations of free-trade agreements (market rules under the CPTPP and Vietnam-EU FTA) and to service public debt. Though, the increased accountability, scrutiny and transparency which stems from public listing also serves the government’s anti-corruption drive.

Seen in this historical context, the creation of the new Commission – to address the speed of divestment and restructuring of SOEs – augurs with the Vietnamese government’s economic strategy.