On Policies For Defense Economic Enterprises

3.2.2.1. On policies for defense economic enterprises

 Product policy

- Implement a competitive bidding policy to select contractors to supply dual-use products and services for national defense. Allow outside enterprises, including foreign enterprises and private enterprises, to participate in bidding for investment in construction and supply of products, including products and services for national defense, thereby forcing national defense enterprises to improve quality and lower prices to compete with other enterprises.[68]

- Annually, it is necessary to review and publish the list of public service products and services or those directly serving national defense and business products on the market produced, supplied or implemented by national defense enterprises. Specifically:

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(1) For the group of public products/services , the main goal is not profit, but to serve the defense. The provision of these products/services can be carried out in different ways. The selection of the method of providing public products/services is carried out in the following order of priority: Bidding; Ordering; Plan assignment. This will be an innovation in the policy of public products/services because previously the Ministry of National Defense mainly applied the method of plan assignment, not bidding. The Ministry of National Defense or its affiliated units are assigned to carry out the task of organizing bidding, ordering, and plan assignment for public products and services in the State budget expenditure estimate.

The rights and obligations of KTQP enterprises when participating in the production and supply of public products and services will be determined as follows: 1) Sign contracts and conduct economic accounting in accordance with the provisions of law; 2) Be paid according to the price or fee according to the signed contract or according to regulations approved by competent state agencies; 3) Be supported and facilitated to produce and supply public products and services according to State regulations; 4) Must self-compensate for costs according to the bidding price when participating in

Production and supply of public products and services by bidding method. This is a new point compared to before; 5) KQP enterprises participating in the production and supply of public products and services by ordering method, or by assigning plans, in case the consumption price is lower than the actual reasonable cost, they will be subsidized or subsidized. The subsidy level is the difference between the consumption price as prescribed by the State and the reasonable production cost of the enterprise to produce and supply public products and services ordered and assigned by the State. The subsidy level is the difference between the amount paid by the beneficiary of the public product/service and the reasonable production cost of the enterprise to produce and supply public products/services ordered and assigned by the State. The Ministry of Finance decides the subsidy level for public products/services ordered by the State and paid for from the State budget based on the proposal of the Ministry of National Defense; 6) KTQP enterprises only receive orders to produce and supply public products/services if they have sufficient capacity in terms of capital, technical level, production technology, management level and workers' skills to meet the requirements of the order contract.

(2) For the business product group, the goal of this product group is profit. The economic and technical enterprise itself selects and decides on this product list based on the market situation, demand and market prospects for each type of product supplied by the enterprise; the production and consumption capacity of the enterprise's products and services. Then, the economic and technical enterprise must register its business lines and products with the Ministry of National Defense management agency. Like other business enterprises, the business products of the economic and technical enterprise are produced and supplied by the method of the enterprise participating in bidding on the market. In order for the business products of the economic and technical enterprise to be competitive, the enterprise must have measures to improve quality, save costs, expand the distribution system, and increase sales promotion activities. Because the business product group does not receive priority from the State, the economic and technical enterprise often encounters difficulties in developing this product: limited capital, mainly borrowed capital, lack of skilled human resources, machinery, etc.

Technology machinery has not met the requirements. Therefore, to help KQP enterprises improve their competitiveness and stand firm in the market, the author of the thesis recommends policy solutions to support the development of KQP enterprises' business product groups as follows:

- On the basis of clearly identifying key industries and fields that need investment and development, the Ministry of National Defense encourages enterprises to diversify products and types of production and business activities, create more jobs, and increase income for workers [36]. Orient and support enterprises to design and develop new products to meet market needs.

- Support enterprises to actively improve techniques and innovate technological equipment, as a basis for maintaining defense capacity.

- Assist businesses in market analysis, market expansion promotion, especially international markets, economic information support, help businesses operate in the right direction, seek investment and development cooperation opportunities, limit risks, and develop production and business.

- For products requiring high technology and large capital, enterprises are allowed to form joint ventures with domestic and foreign enterprises and organizations on the principle of ensuring internal political security of the military and the country, in accordance with the law and regulations of the Ministry of National Defense for production and consumption.

- Support businesses in ensuring technical and social infrastructure such as roads, housing, human resource training, and healthcare and education systems for workers.

- Eliminate discrimination between joint stock companies and 100% state-owned companies when assigning tasks to produce military products. In fact, for joint stock companies, when receiving production of military products, they are not entitled to the 30% QPAN allowance in the unit salary price, but only non-equitized enterprises are entitled to it [11]. Regarding this issue, in the coming time, the Ministry of National Defense will assign the Finance Department to coordinate with relevant agencies to study and resolve it appropriately.

 Financial and credit policy:

(1) Capital mobilization and use policies need to be innovated in the direction of enhancing financial capacity for enterprises. In order to meet the capital needs of economic and defense enterprises, the Government can allow the expansion of capital mobilization sources through many channels, including:

 Capital from the State budget. Regarding this source of capital, the thesis has the following recommendations: (i) The Ministry of National Defense prioritizes budget capital for enterprises investing in high technology and modern equipment. (ii) For single-member LLCs in which the State needs to hold 100% of capital, the State uses the enterprise arrangement fund to supplement the charter capital of the enterprise. (iii) For joint stock companies, the Ministry of National Defense must act as the owner's representative to manage the State capital portion in the enterprise and invest in other enterprises, ensuring the preservation and development of State capital.

 Mobilizing loans from banks and credit institutions. Economic enterprises can borrow through the Military Commercial Joint Stock Bank or any bank or credit institution with agreed interest rates. Recommendation: Joint stock companies and 100% state-owned LLCs must be treated fairly in mobilizing capital from banks.

 Mobilizing capital through issuing shares. In particular, allowing state-owned enterprises to sell shares to the public; this is an innovation because previously, shares of state-owned enterprises were only sold internally, not to organizations and the public. It is necessary to regulate information disclosure and mandatory auditing for state-owned enterprises to gain public trust in state-owned enterprises that have just entered the stock market.

 Mobilizing capital through cooperation, joint ventures, and support associations between organizations, including public-private partnerships (PPP). For example, joint ventures with private enterprises, including foreign ones, in projects requiring large capital such as construction of industrial works, seaports, airports, etc.

(2) Tax policy . Reforming tax policies and tax regulations must be consistent with international practices and trade liberalization commitments. It is necessary to make tax administrative procedures transparent, public, and simple in order to create more favorable conditions for enterprises to pay taxes and integrate internationally.

(3) Innovative profit distribution policy towards increasing the initiative of enterprises, creating motivation for enterprises to produce and do business effectively, encouraging enterprises to invest in development and expand production. In that direction, it is recommended to adjust the rate of fund allocation from after-tax profits of state-owned enterprises, including economic and defense enterprises, as follows:

 There should not be a general rate of fund allocation for all economic and technical enterprises of different sizes and in different industries and fields; but it should be applied flexibly, depending on the characteristics, position and role of each type of enterprise. For example, the rate of investment incentive fund allocation for industrial enterprises may be higher than that of commercial and service enterprises. For enterprises in difficult areas, the rate of reward fund and welfare fund allocation may be higher than that of enterprises in the same industry but located in favorable areas.

 It would be more reasonable if the State only provides a framework for fund allocation and enterprises have the right to decide within that framework. Thus, on the one hand, the State can still manage the distribution of profits, on the other hand, enterprises can still expand the right to allocate and use funds. For the Development Investment Incentive Fund, the Reserve Fund, and the Employment Fund, the State should only control the minimum allocation level, not the maximum allocation level. As for the Reward Fund and the Welfare Fund, enterprises should be allowed to make their own decisions.

Information obtained through direct interviews with business managers also shows that most of them want to adjust fund allocations in the two directions mentioned above.

 Investment policy

For businesses that are growing and have increasingly improved competitiveness, the State needs to have investment policies to expand scale, innovate technology, equipment, train, foster and attract talent to promote businesses to operate more effectively.

For the production and business sector to create wealth for society, especially goods for national defense and essential needs of the people, the State encourages enterprises to invest to expand scale and improve product quality.

For defense and security enterprises with strengths in the fields of traffic construction, underground works, information technology, seaport services, aviation services, mining, agricultural production in strategic areas, etc., there needs to be a long-term investment strategy to improve the capacity to perform defense and security tasks associated with production and business efficiency.

For key industries and fields - those in which the Army has advantages and brings high added value (such as flight services, telecommunications, software technology, aquaculture, etc.), the Ministry of National Defense needs to have policies to encourage and support investment and development, such as investing in these enterprises to expand exports, investing in developing raw material areas for aquaculture and seafood processing, investing in research and development activities at enterprises, improving product and service quality, developing markets and increasing market share.

There is a policy to promote and encourage foreign economic enterprises to invest effectively abroad to increase value, not export raw products to save resources, protect the environment, use renewable technology; gradually limit and eventually ban the export of raw materials.

 Pricing policy. For dual-use products serving QP, the principle applies: equal product quality means equal payment, regardless of which enterprise produces it. In the coming time, it is necessary to study and organize open bidding for this type of product, which enterprise supplies the product?

If it is better and the price is lower, then let that enterprise do it. It will benefit the national defense and security enterprise, promote the enterprise to improve its competitiveness and save the state budget for defense.

3.2.2.2. On promulgation of legal documents.

Building a synchronous legal framework to create a framework for the operation of economic and technical enterprises. Having sanctions to ensure the implementation of policies, regulations and laws. To increase the effectiveness of State management of economic and technical enterprises through the system of documents, the thesis proposes the following innovative solutions:

- In addition to the general regulations for all enterprises, the Ministry of National Defense needs to study the characteristics of the economic and defense enterprises in order to have more specific guidance documents for enterprises . In addition to complying with the general law, economic and defense enterprises must also comply with a number of specific regulations of the Ministry of National Defense. In order to properly implement the above regulations, economic and defense enterprises are at a disadvantage and may lose the opportunity to compete. Therefore, economic and defense enterprises must be given priority in terms of State investment, land rental prices, preferential loan interest rates, tax exemptions and reductions when facing difficulties, especially those located in remote areas, revolutionary bases, border islands, and strategic areas.

- Proposing to amend and supplement some contents of Decree No. 31/2005/ND-CP which are no longer suitable to current reality, specifically: (i) Regulations on organization, management and operation of single-member LLCs directly owned by the State serving the National Defense and Security Service have been stipulated in Decree No. 104/2010/ND-CP dated October 11, 2010 of the Government; (ii) The current regulations on reorganization, management organization and operation of state-owned enterprises performing public service tasks in Decree No. 31/2005/ND-CP are unnecessary and cause overlap in the system of legal documents on enterprises, because these regulations have been stipulated in the Law on Enterprises and Decree No. 25/2010/ND-CP dated March 19, 2010 of the Government on converting state-owned enterprises into single-member LLCs and the organization and management of single-member LLCs owned by the State and implementing documents. In fact, it is only necessary to regulate the management of state-owned enterprises.

Managing capital and assets serving production and supply of public products/services of a single-member LLC owned by the State.

- It is necessary to supplement regulations on the method of providing public products and services in accordance with the provisions of the Law on Bidding and guiding documents for implementation. At the same time, it is necessary to consolidate the contents of Decision No. 256/2006/QD-CP dated November 9, 2006 of the Prime Minister promulgating the Regulations on bidding, ordering, and assigning plans for production and provision of public products and services (referred to as Decision No. 256/2006/QD-TTg) into the Decree replacing Decree No. 31/2005/ND-CP to unify the contents and focus on one document, facilitating implementation.

- There must be strong enough sanctions to force entities to comply and ensure enforcement of policies, regulations and laws.

3.2.3. Group of solutions on organizational structure

The basis for proposing this group of solutions is:

- The speed of implementing the policy of restructuring and innovating state-owned enterprises, including state-owned economic enterprises, has been slower than planned. The current apparatus of state-owned economic enterprises is still ineffective and heavily affected by the subsidy mechanism. Therefore, it is necessary to renovate and reorganize the apparatus of state-owned economic enterprises in the direction of improving business efficiency, and implement it synchronously with the reform of the state-owned enterprise sector.

- The current State management apparatus for economic and defense enterprises has not met the requirements of enterprise development, has not performed well the State management functions for economic and defense enterprises, and has not really created conditions for enterprises to perform the tasks of serving national defense and production and business tasks. Therefore, it is necessary to innovate the State management apparatus for economic and defense enterprises, boldly reform in the direction of streamlining the apparatus, building a competent and clean State management apparatus, creating favorable conditions for enterprises to operate production and business more effectively.

The solutions can be divided into two groups: perfecting the state management apparatus for national defense enterprises and innovating the production and business organization model of national defense enterprises.

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