Development Orientation and Goals of Coal Mining and Processing Joint Stock Companies of Vietnam National Coal - Mineral Industries Group

CHAPTER 3

SOLUTIONS TO IMPROVE INTERNAL CONTROL AT COAL MINING AND PROCESSING JOINT STOCK COMPANIES BELONGING TO VIETNAM COAL - MINERAL INDUSTRY GROUP

3.1. Development orientation and goals of coal mining and processing joint stock companies under Vietnam National Coal - Mineral Industries Group

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Resolution No. 55-NQ/TW dated February 11, 2020 of the Politburo on Vietnam's national energy strategy orientation to 2030, with a vision to 2045, sets out the requirements and tasks for coal industry development: to build a new coal industry development strategy associated with the task of effective investment abroad and long-term coal import. Implement appropriate coal reserves to meet the requirements of production activities, especially electricity production. Expand exploration and survey, improve the quality of assessment of reserves and resources. Promote domestic coal mining on the basis of ensuring safety, efficiency and saving resources; urgently research technology to exploit the Red River Delta coal basin; improve the clean coal recovery coefficient in underground mining. Quickly deploy the construction of a large-scale coal port, storage and transit system; increase mechanization and modernization of coal screening, sorting and mining equipment. Review, assess demand, develop plans and optimize solutions to provide stable coal supply for electricity production in accordance with market mechanisms. [1]

Currently, the orientation and development goals of the coal industry are being implemented according to Decision No. 403/QD-TTg dated March 14, 2016 of the Prime Minister on "Planning to adjust the Development Plan of Vietnam's coal industry".

2016 to 2020, with prospects to 2030” [19] . Accordingly, the coal industry is oriented to develop according to the following viewpoints and goals:

3.1.1. Development perspective

Firstly, develop the coal industry on the basis of exploiting, processing, using effectively and economically the country's coal resources; actively contribute to ensuring national energy security, prioritizing meeting domestic demand; ensure reasonable import and export in the direction of gradually reducing exports and only exporting types of coal that are not yet in demand domestically through planned management measures, other regulatory measures in accordance with the market mechanism under State management and Vietnam's international commitments.

Second, promote basic investigation, exploration, and assessment of domestic coal resources and reserves to prepare a reliable resource base for the sustainable development of the coal industry.

Third, promote business activities and investment abroad to meet enough coal for the country's socio-economic development needs.

Fourth, ensure sustainable coal production and consumption, meeting long-term domestic demand; develop the coal industry effectively, synchronously and in line with the general development of the economic sector; diversify coal investment and trading methods. Maximize internal resources (capital, design capacity, domestic equipment manufacturing, etc.) combined with expanding international cooperation to research, deploy, and apply advanced technology in coal exploration, exploitation, processing and use; apply advanced technical and management solutions to reduce the loss rate in coal mining; invest reasonably in environmental protection, labor safety, resource management, and risk management in coal mining.

Fifth, conduct coal business according to market mechanisms under State management, in harmony with the world coal market.

Sixth, develop the coal industry in association with protecting and improving the ecological environment of coal regions; in harmony with tourism development, minimizing impacts on cultural conservation areas; actively contributing to socio-economic development, associated with the task of consolidating and enhancing national defense and security in the area; ensuring safety in production. [19]

3.1.2. Development goals

a. General objectives

Building Vietnam's coal industry into a highly competitive developed industry with advanced technology compared to the region in all stages of coal exploration, exploitation, screening, processing and use; meeting enough coal for domestic use, especially coal for electricity production.

b. Specific goals

- About exploration:

+ For the Northeast coal basin, basically complete exploration work to the bottom of the layer to ensure sufficient reserves and reliable resources to be mobilized for exploitation in the period 2021 to 2030 and the period after 2030.

+ For the Song Hong coal basin, complete the exploration of the Nam Thinh area and part of the Nam Phu II mine - Tien Hai - Thai Binh to serve the establishment and implementation of the pilot project. On that basis, conduct extensive exploration to develop the coal mine on an industrial scale and with appropriate technology.

- Regarding exploitation: The total output of commercial coal produced in the industry reached 51

- 54 million tons by 2025; 55 - 57 million tons by 2030.

- Regarding coal loss: Strive to reduce the coal loss rate by underground mining method to below 20% after 2020; the coal loss rate by open-pit mining method to below 5%.

- Regarding screening and processing: Complete the arrangement of screening facilities in Quang Ninh area to optimize transportation and screening work and comply with regulations.

urban development planning in coal regions, transportation planning, seaports and environmental protection requirements. After 2020, coal processing will be directed towards product diversification to flexibly meet market demand.

- Regarding environmental protection: From 2020, fully meet environmental standards throughout the mining area.

- Regarding the coal market: focus on meeting the domestic market's coal demand combined with reasonable and effective import and export. [19]

3.2. Principles for improving internal control at coal mining and processing joint stock companies under the Vietnam National Coal - Mineral Industries Group

Coal mining and processing joint stock companies under TKV have their own characteristics in management organization, production activities, and business environment. Therefore, the design and operation of internal control is necessary but must ensure specific principles based on the general principles of internal control and the specific characteristics of the company. The principles that need to be thoroughly understood to perfect internal control at coal mining and processing joint stock companies under TKV can be mentioned as follows:

Firstly, perfecting internal control must ensure appropriate principles.

- Suitable for equitization plan

One of the key objectives of TKV in the coming time is the plan to divest state capital in the majority of enterprises in the group. Partly to help improve competitiveness, attract resources from society and aim for enterprises to change in management activities from a dependent mindset to a self-reliant mindset, easily adapting to changes in the market. To do so, coal mining and processing joint stock companies must be transparent in information and the information must ensure honesty and reasonableness to create trust for shareholders and society. To do that, the Internal Audit must undertake inspection, control and supervision activities effectively and efficiently.

- Suitable for business characteristics and management organization

The internal control model depends on each type of enterprise, scale and production characteristics... The design of internal control for enterprises in the group is not entirely the same due to the complexity and risks of each enterprise. For example, the same coal mining enterprise but mining in different terrains leads to different production activities and different risks... Therefore, the construction of internal control must be suitable for each specific enterprise.

Completing internal control must ensure the principles of savings and efficiency.

Internal control is established and operated with many different objectives. When internal control is established with more objectives, it will incur more costs. Meanwhile, most business administrators do not want to spend a large amount of money in exchange for less benefits from designing and operating internal control. Therefore, when designing internal control, in addition to ensuring the effectiveness goal, it is necessary to ensure that the benefits that internal control brings are greater than the costs that the unit has to pay.

Completing internal control must ensure compliance principles.

Coal mining and processing joint stock companies under TKV are all subject to inspection, control and supervision by management agencies such as the Ministry of Industry and Trade, the Ministry of Finance, the State Capital Management Committee, the State Audit, the Government Inspectorate and the Group. Therefore, the operations of coal mining and processing joint stock companies are subject to the control of superior management agencies and must comply with the general regulations of the Group. Internal control must be established first on the basis of regulations of the State and the Group. When inspecting and supervising coal mining and processing joint stock companies, the primary concern of superior management agencies is the goal of compliance with the law and relevant regulations.

3.3. Solutions to improve internal control at coal mining and processing joint stock companies under Vietnam National Coal - Mineral Industries Group

3.3.1. Solutions to improve the control environment

The quantitative research results in the current situation section show that the control environment has the strongest impact on the effectiveness of internal control. Therefore, perfecting the control environment is a task that needs special attention to complete and focus on building according to the following contents:

First, enhance integrity and ethical values

Building a Code of Conduct helps to orient and manage human resources with ethical standards, contributing to building corporate culture and especially helping coal mining and processing joint stock companies avoid risks of corruption and fraud by employees in the process of performing their duties. However, currently, the Group has no regulations requiring enterprises to build a Code of Conduct and there is no direction to build a model Code of Conduct for companies belonging to the Group. In order to be proactive in building a Code of Conduct, coal mining and processing joint stock companies first need to raise awareness of the role of building a Code of Conduct. In order for the Code of Conduct to promote ethical values, managers at coal mining and processing joint stock companies need to:

- Building ethical criteria :

Business ethics criteria reflecting corporate culture need to be carefully and specifically drafted by coal mining and processing joint stock companies. Ethical criteria act as a compass to guide the development of codes of conduct, and at the same time, determining criteria and standards of business ethics can help companies identify areas of risk.

For organizations, ethical conduct criteria mostly guide companies to develop based on standards such as respecting human rights, respecting the law, international commitments; respecting and honoring customers; valuing material and spiritual management; valuing the role of shareholders and employees in the company; being responsible to the community; protecting the environment... [41]

- Develop and implement a code of conduct

Coal mining and processing joint stock companies must identify behavioral standards that can help clarify standards and have the real ability to detect and prevent violations of professional ethics standards; assign leaders and some individuals with knowledge of the law and ethical standards to participate in developing or supervising the development of the Code of Conduct [41].

It is necessary to propagate, disseminate and guide the application of criteria and codes of conduct through training and fostering activities to everyone in the company, representatives and partners; to be consistent and persistent in implementing and deploying the code of conduct; to designate a management position responsible for implementation; to notify the entire company of the obligation to study and thoroughly understand the standards and purposes of issuing the code of conduct; to establish a system to monitor, inspect and report on violations of the standards stipulated in the company's code of conduct [41].

In the process of implementing the code of conduct, it is necessary to have regulations on sanctions for violations. Violations need to use financial sanctions and disciplinary measures to ensure strictness in the implementation process. In addition, to ensure the objective assessment of employees' attitudes and compliance with ethical standards, it is necessary to deploy evaluation forms from third parties such as customers, suppliers, banks, cross-assessments within the company...

- Integrity is built into the core of the Code of Conduct.

Personal integrity must be ensured by correct actions even when there is no supervision. Integrity can be understood as honesty in behavior, fairness in relationships and integrity in handling work. To enhance integrity for the entire company, managers need to be a leading example to inspire trust in relationships with colleagues and partners to bring positivity and be worthy of the trust that employees place in managers, contributing to promoting the dedication of each individual in the unit.

The integrity of each individual in the company requires not using fraudulent tricks or illegal actions to gain personal or group benefits. To do so, each individual must keep their word in relationships, ensure the proper performance of obligations and commitments to assigned responsibilities. At a coal mining and processing joint stock company, building the principle of integrity first requires mutual respect. Specifically, to motivate employees to contribute to the company, leaders must respect the dignity and legitimate rights (salary, insurance, retirement, policies); ensure labor safety; create conditions for physical and intellectual development of the staff and employees in the company; expand democracy, encourage and respect initiatives, technological improvements; respect the needs, interests and psychology of employees. In addition, managers need to be role models in complying with regulations and in behavioral culture to establish cultural norms in the company.

Second, enhance the supervisory role of the Board of Directors and the Board of Supervisors.

- Strengthening the functions of the Board of Directors: In order to further strengthen the functions of the Board of Directors in the process of supervising and directing the Director and managers in the company, coal mining and processing joint stock companies need to: