Table 2.1, affected by factors such as the East Sea dispute, exploitation technology, and accumulated capital, also shows that PVN's production and business situation in the future will be narrowed and will affect oil and gas income and employment.
PVN carries out social security activities both internally and externally. Internally, it is implemented through policies to care for the lives of employees such as distributing income support to more difficult units, welfare regimes such as health care, education, training, vacation visits, care for major holidays, etc. For external social security activities using annual profits, PVN has allocated 1,414 billion VND from reward and welfare funds in 2016 and 1,283 billion VND in 2017 as the basis for implementing social security and welfare programs and projects. In addition, PVN also calls on employees to participate in social security activities through unpaid work to support funds for the poor, education promotion funds, and support for natural disaster programs... In the projects that PVN implements, PVN also supports localities in investing in building traffic infrastructure, building schools, charity houses, schools, hospitals... In the period of 2011-2013, PVN contributed 1,217 billion VND to support social security. It is because of its active participation in social security activities that PVN has been recognized by the Party and State for its contributions, according to the assessment of the 6th Central Conference, 11th term: Units under the Vietnam National Oil and Gas Group are leading enterprises in social security work with hundreds of billions of VND each year and actively participate in protecting territorial sovereignty.
2.4. Management and innovation of science and technology
With more than 50 years of formation and development, the Vietnam Oil and Gas industry has made significant progress, achieved important achievements in production and business activities and contributed to the country's economic development. However, compared to oil and gas corporations in the region and the world, the Vietnam Oil and Gas Group still has a large gap, not only in scale but also in production and business efficiency and global brand. To change, it is urgent to reform to create effective mechanisms and methods of operation. Based on the theoretical foundation in
Chapter 1, factors affecting the efficiency of state-owned enterprises include: State management; Governance and supervision; Science, technology and innovation. Therefore, it is necessary to assess how these factors affect PVN's operations in order to propose solutions to improve these factors to increase PVN's competitiveness and enhance PVN's operational efficiency.
2.4.1. State management of PVN
Because PVN is a type of state-owned enterprise organized in the form of a single-member LLC owned by the state, PVN's operating mechanism is regulated by two laws: the Enterprise Law and the Law on Management and Use of State Capital Invested in Production and Business at Enterprises.
According to the Charter of Organization and Operation of PVN (2018) based on the above 2 laws, the Government will intervene in PVN through the following activities:
Table 2.9: Contents of intervention in PVN from the Government
STT
Content | |
1 | Decision on establishment, objectives, tasks and business lines; reorganization, ownership conversion, dissolution and bankruptcy request; capital contribution to enterprises Other businesses of PVN |
2 | Approval of the Charter, amendment and supplement to the PVN Charter |
3 | Decision on investment in charter capital; adjustment, transfer of part or all charter capital of PVN |
4 | Decide on the organizational structure of PVN management; appoint, re-appoint, dismiss, resign, reward, discipline the Chairman and members of the Board of Members. Member, Controller, General Director of PVN |
5 | Decide on strategy, production and business plans and investment plans development of PVN |
6 | Approve investment policies, purchase and sale of assets and loan and lending contracts of PVN by authority |
7 | Regulations on financial regime, profit distribution, provision and use of funds Fund; approve PVN's annual financial report |
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Regulations on recruitment, salary, bonus, decision on salary fund, remuneration for members of the board of members, board of supervisors, members Director and Chief Accountant | |
9 | Decide on solutions for market development, marketing and technology; prescribe the mechanism for assigning tasks and participating in the implementation of providing and ensuring essential public products and services of the economy |
10 | Supervise, inspect and examine the compliance with the law; evaluate the implementation of assigned goals and tasks, performance results, production and business efficiency; manage, use, preserve and develop PVN's capital. Evaluate members of the board of members, the board of supervisors, members of the board of directors and Chief Accountant in PVN Management and Operation |
11 | Exercise other rights as prescribed by law |
(Source: Charter of organization and operation of PVN (2018))
Agencies participating in state management of PVN include:
Table 2.10: Agencies participating in PVN management
STT
Agency name | |
1 | Government |
2 | Ministry of Industry and Trade |
3 | Ministry of Finance |
4 | Ministry of Planning and Investment |
5 | Home Office |
6 | Ministry of Labor, War Invalids and Social Affairs |
7 | Ministries, ministerial-level agencies and government agencies for the following fields: related areas |
(Source: Charter of organization and operation of PVN (2018)) Thus, it can be seen that PVN's operations, in addition to being regulated by the Enterprise Law according to the general business environment, are also subject to the Law on Management and Use of State Capital Invested in Production and Business at Enterprises because the State owns 100% of capital at PVN. According to the charter, there are many opportunities
State agencies participate in managing PVN and almost all issues related to PVN's operations are decided by the Government and Government agencies.
Previously, with the development policy of the State Economic Group investing in many sectors, along with large financial resources at a time when oil prices were high, and with the stock market, real estate market, and financial market booming. PVN invested in real estate, securities, banking, and many other non-industry sectors to seek high profits despite having no experience in these sectors and an insufficiently strong management system, many subsidiaries and departments were born. After the above markets were difficult, the global economic recession and the decrease in oil prices, the non-industry investment units encountered many difficulties and suffered many losses, affecting PVN's dual business efficiency, that is, the capital invested was lost and the main business activities lacked capital and were not focused, also affecting PVN's main business activities.
When the Shipbuilding Industry Group (Vinashin) was in a difficult situation, even considered bankrupt, the Government restructured Vinashin, in which many units of Vinashin were transferred to PVN in their original state to handle finances and develop business. However, because these units were transferred in their original state and were valued according to accounting books, it greatly affected the financial situation of PVN. PVN had to spend money to handle the remaining debts of Vinashin units and maintain the business operations of these units, spend money to invest in facilities for these units because previously Vinashin units were investing in the middle of their projects and were not qualified to do business. The settlements of PVN and Vinashin are still hanging in the books and have not been processed or settled. The units transferred to PVN are increasingly losing more and more, this has greatly affected the general operations of PVN, the financial situation and operating efficiency of PVN.
PVN is still 100% state-owned, managed by the Government and performing the function of state ownership. Currently, almost all units of PVN have been equitized. Units that are operating inefficiently or are not related to core business activities have low ownership ratios. Units that operate effectively and are related to core business activities have low ownership ratios.
Regarding core business activities, the state capital ownership ratio is still high.
According to the plan until 2020 and beyond, PVN will gradually reduce core business activities towards only being related to the main oil and gas activities such as oil and gas exploration, exploration, exploitation and processing and will proceed with equitization. Inefficient units will be divested and declared bankrupt. Units not related to core oil and gas will divest all capital. Units related to current business activities will reduce the remaining ownership ratio and will divest all capital. Not only that, the apparatus and management system will also be restructured towards streamlining and reform to improve operational efficiency.
Thus, although the State still owns 100% of PVN's capital, PVN's units have been, are and will be strongly restructured in the coming time in accordance with the spirit of the 12th Party Congress. The decisions to invest in multiple sectors and restructure struggling units from Vinashin to PVN have severely affected PVN's operating efficiency such as loss of capital, other resources and impact on core business activities.
2.4.2. PVN management system and inspection and monitoring system
The management system is evaluated through the following 11 criteria:
Table 2.11: PVN's management system
STT
Indicators on Administration | Evaluate | |
1 | Performance evaluation system, reporting system | The reporting and management assessment system is chaired, guided and assessed by the Ministry of Finance. The reports are mostly statistical, with few assessments, and do not follow international standards. The financial reporting system is regulated by the Ministry of Finance, but does not follow international standard |
2 | Information Disclosure | Information disclosure is not up to international standards, mainly The financial statements are crucial to the success of the project. |
network, other information is very little, there are no reviews, analysis, comparisons to attract investors and carry out public supervision. | ||
3 | Rights and obligations of the board of members, board of directors and board of supervisors | Salary and bonus are regulated by the Government, bonus level is based on completion of assigned plans and tasks, business classification is based on salary received. Dismissal when not completing assigned tasks, rescheduled tasks built by the owner's representative. |
4 | Standards for members of the board of members, board of directors, board of supervisors | Owner representatives are appointed according to the staff appointment process, without examination or strict evaluation or emphasis on talent selection, mainly from internal sources or transfers from other public units, candidates are often politically connected or managers at SOEs can transfer to become officials. function or vice versa. |
5 | Independence of the Board of Directors | Depending on the decisions from the state management agencies, the director remains on the board of directors, and the board of directors appoints/dismisses the director through the consent of the government, so the director is fully responsible for the business's operations before the board. management is unclear. |
6 | CEO | The CEO is often also a member of the board. PVN's board of directors and internal resources |
7 | Foreign ownership | In foreign-owned subsidiaries, there is usually little impact or influence. Because PVN is still the owner. 100% state-owned so there is no ownership and |
influence from foreign shareholders, so there is no pressure for governance reform | ||
8 | Independent Controller/Board Member/Administrator | There are independent controllers/members of the board of members/management appointed from ministries, branches and superior units. There are no independent auditors. established from outside. |
9 | Income of the board of members, board of directors and board of supervisors | According to state regulations and not following the market mechanism, making the management board have no business motivation or motivation to find sources of income. other imports not in accordance with regulations |
10 | Minority shareholder rights | Because PVN is state-owned, there is no minority shareholder, so there is no pressure to reform governance and improve operational efficiency. However, PVN's joint stock units listed on the stock market have minority shareholders, even though they have influence but not much |
11 | Organizational model | The organizational model, although restructured, is still not optimized according to operational needs due to intervention from many sides, and the operating system is still administrative. Member companies, although equitized or listed on the stock market, still have the color of the parent company and have a lot of intervention from the parent company without independent operations like other enterprises. Many subsidiaries have overlapping business fields. cross and same. |
(Source: Synthesized from author's investigation and observation)
Through the above analysis, it can be seen that the characteristics of PVN's management system, although it can be considered good compared to other SOEs in Vietnam, still have many administrative colors like many other SOEs, so there is no independence and flexibility in production and business activities like other types of enterprises, so it is difficult to compete and bring high operating efficiency.
In addition to the annual independent audit, PVN is also subject to inspection and supervision by the following agencies:
Table 2.12: Agencies participating in PVN inspection and supervision
Status
Inspection agency | Governing body | Frequency of testing | |
1 | Central Inspection Commission | Party Central Committee | According to the incident |
2 | State Audit | National Assembly | 2 years/by case |
3 | Government Inspector | Government | 3 years/by case |
4 | Ministry of Industry and Trade | Government | 3 years/ according to the case |
5 | Ministry of Finance | Government | 3 years |
6 | Ministry of Construction | Government | According to the incident |
7 | Ministry of Public Security | Government | According to the incident |
8 | Ministry of Labor, Invalids and Social Affairs | Government | According to the incident |
9 | Ministry of Planning and Investment | Government | According to the incident |
10 | General Department of Taxation | Ministry of Finance | 3 years |
11 | Custom | Ministry of Finance | According to the incident |
12 | Local authorities direction | Department/Agency of Province/City | According to the incident |
(Source: Synthesized from author's investigation and observation)
Thus, it can be said that PVN is subject to inspection by many agencies, but in reality, violations still occur. Having many inspection and supervision agencies and not being focused will negatively affect PVN's production and business activities. The internal control system is still not operating properly with its functions and is also affected by the management and operations.