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Proportion of Some Economic Indicators of Business Sectors in the Period


State-owned enterprise sector

1,498,784

1,205,022

80.4

- Including 100% state-owned enterprises

923,990

705,928

76.4

Non-state enterprise sector

7,030,971

8,788,714

125.0

FDI enterprise sector

3,108,622

4,460,873

143.5

Capital (billion VND)




Nationwide

18,825,338

33,339,674

177.1

State-owned enterprise sector

6,078,850

9,051,408

148.9

- Including 100% state-owned enterprises

3,948,974

4,549,218

115.2

Non-state enterprise sector

9,309,231

18,264,711

196.2

FDI enterprise sector

3,437,258

6,022,076

175.2

Equity Ratio (%)




Nationwide

31.5

30.5


State-owned enterprise sector

24.9

21.5


- Including 100% state-owned enterprises

26.7

28.1


Non-state enterprise sector

33.4

32.3


FDI enterprise sector

38

38.4


Fixed assets and long-term investments (billion VND)




Nationwide

7,645,557

13,547,927

177.2

State-owned enterprise sector

3,168,949

4,078,437

128.7

- Including 100% state-owned enterprises

2,323,373

2,520,860

108.5

Non-state enterprise sector

3,024,830

6,893,588

227.9

FDI enterprise sector

1,451,778

2,576,906

177.5

Net revenue (billion VND)




Nationwide

12,427,360

20,579,708

165.6

State-owned enterprise sector

2,852,743

3,135,165

109.9

- Including 100% state-owned enterprises

1,778,785

1,976,230

111.1

Non-state enterprise sector

6,538,001

11,637,642

178.0

FDI enterprise sector

3,036,616

5,809,046

191.3

Profit before tax (billion VND)




Nationwide

458,189

828,406

180.8

State-owned enterprise sector

171,866

196,099

114.1

- Including 100% state-owned enterprises

100,155

113,776

113.6

Non-state enterprise sector

100,823

267,685

265.5

FDI enterprise sector

185,499

364,506

196.5

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Proportion of Some Economic Indicators of Business Sectors in the Period

Source: Ministry of Planning and Investment (2020)


From Table 3.1 it can be seen that in the period 2016-2018:

- The number of employees in the state-owned enterprise sector accounts for 8.3% of the total number of employees, while in the non-state enterprise sector it is 60.8%, and in the FDI enterprise sector it is 30.9%.

- The capital scale of the state-owned enterprise sector accounts for 27.1%, the non-state enterprise sector is 54.8%, and the FDI enterprise sector is 18.1% of the total capital of enterprises nationwide.

- The scale of fixed assets and long-term investment of the state-owned enterprise sector accounts for 30.1%, the non-state enterprise sector is 50.9%, and the FDI enterprise sector is 19% of the total value of fixed assets and long-term investment of enterprises nationwide.

- Net revenue and pre-tax profit of the state-owned enterprise sector accounted for 15.2% and 23.7% respectively, the non-state enterprise sector was 56.6% and 32.3%, the FDI enterprise sector was 28.2% and 44% of the total nationwide.



State-owned enterprise sector

Non-state enterprise sector

FDI enterprise sector

Profit before tax Net revenue

Fixed assets and long-term investments


Capital Number of employees

Number of businesses


0% 20% 40% 60% 80% 100%


Figure 3.3 Proportion of some economic indicators of business sectors in the period

2016-2018

The above information shows that the number of state-owned enterprises accounts for a very small proportion of the total number of enterprises, the gradual narrowing of the state-owned enterprise sector when all development indicators according to all basic economic indicators in Table 3.1 are much lower than the remaining enterprise sectors. However, the proportion of labor scale, capital scale, assets of the state-owned enterprise sector as well as revenue and profit compared to the entire enterprise sector in Vietnam in the period of 2016-2018 still shows that the state-owned enterprise sector still has an important position (Figure 3.3), especially when compared through a more detailed analysis of economic indicators calculated on average per enterprise (Table 3.2).


Table 3.2 Some basic economic indicators of an average enterprise in the period 2011-2015 and the period 2016-2018


Average economic indicators/enterprise

Average

2011-2015

Average

2016-2018

Percentage

Number of employees (people)




Nationwide

31

26

84.0%

State-owned enterprise sector

481

488

101.5%

- Including 100% state-owned enterprises

599

592

98.8%

Non-state enterprise sector

19

16

84.3%

FDI enterprise sector

304

284

93.7%

Capital (billion VND)




Nationwide

50

60

119.8%

State-owned enterprise sector

1,950

3.666

188.0%

- Including 100% state-owned enterprises

2,559

3,813

149.0%

Non-state enterprise sector

26

34

132.3%

FDI enterprise sector

336

384

114.4%

Fixed assets and long-term investments (billion VND)




Nationwide

20

24

119.9%

State-owned enterprise sector

1,017

1,652

162.5%

- Including 100% state-owned enterprises

1,506

2.113

140.3%

Non-state enterprise sector

8

13

153.7%

FDI enterprise sector

142

164

115.9%

Net revenue (billion VND)




Nationwide

33

37

112.0%

State-owned enterprise sector

915

1,270

138.7%

- Including 100% state-owned enterprises

1,153

1,657

143.7%

Non-state enterprise sector

18

22

120.0%

FDI enterprise sector

297

370

124.9%

Profit before tax (billion VND)




Nationwide

1.2

1.5

122.3%

State-owned enterprise sector

55.1

79.4

144.0%

- Including 100% state-owned enterprises

64.9

95.4

146.9%

Non-state enterprise sector

0.3

0.5

179.0%

FDI enterprise sector

18.1

23.2

128.3%

Source: Self-calculated from data of the Ministry of Planning and Investment (2020)


Table 3.2 shows that, in terms of average economic indicators of each enterprise, state-owned enterprises in the period 2011-2015 and the period 2016-2018 have the largest scale in terms of number of employees, capital, fixed assets and long-term investment as well as net revenue and pre-tax profit achieved when compared with enterprises in the remaining sectors.

In addition, the summary of information in Table 3.1 and Table 3.2 partly reflects the characteristics of current state-owned enterprises: they are large-scale enterprises, employ a lot of labor, manage a large amount of fixed assets (in reality, they are often land and infrastructure invested by the state and transferred to enterprises), and have advantages in using borrowed capital (when the equity ratio of 21.5% is much lower than that of the remaining enterprise sectors: the non-state enterprise sector is 32.3% and the FDI enterprise sector is 38.4%).

3.1.4. Measures and forms of arrangement and innovation of enterprises with state capital investment

With the role and position of state-invested enterprises in general, and state-owned enterprises in particular, in the economy, the reform and innovation of state-owned enterprises has always been a matter of concern in Vietnam. When Vietnam entered the period of innovation, international economic integration, and implemented the development of a multi-sector economy operating under the market mechanism, the restructuring of state-owned enterprises also began to be implemented with measures of assignment, sale, contracting, leasing, dissolution of enterprises and equitization since the 90s of the 20th century.

Looking back at the process of reforming and innovating state-owned enterprises up to now, the restructuring of state-owned enterprises has taken place with the following main measures and forms:

* Reorganize state-owned enterprises through mergers, consolidations, dissolutions, and bankruptcies of loss-making and inefficient enterprises.

This form is mainly implemented to arrange and reduce SOEs that were established indiscriminately, dispersedly, small-scaled, and operated at a loss for a long time, with low efficiency. This form was commonly implemented in the early stages of the reform and innovation of SOEs (Decision No. 315-HDBT dated September 1, 1990 of the Council of Ministers), bringing about immediate impacts; through the dissolution of a series of SOEs operating at a loss and inefficiently, they were removed from the list of SOEs, the State did not have to worry about subsidies and loss compensation, in addition, the consolidation and merger also rapidly reduced the number of SOEs. In fact, if by the end of 1989, the whole country had about 12,000 enterprises


By 1992, the year the equitization was implemented, the number of state-owned enterprises was only about 6,500.

However, implementing the form of consolidation and merger does not completely solve the operational efficiency of state-owned enterprises, does not change the capital structure of the enterprise; in fact, many cases are only the accumulation of capital, assets, labor ... along with the backlog of ineffective operations, losses before the merger and consolidation. In addition, implementing in the form of bankruptcy is a popular form in countries with developed market economies, but in reality in Vietnam it is less effective due to legal procedural problems.

* Transfer and sell state-owned enterprises in industries and fields that the State does not need to hold and cannot be equitized.

This form has been implemented since 1999 with specific forms such as transferring, selling, contracting business, leasing an entire SOE with the aim of arranging and innovating small-scale SOEs that have suffered long-term losses or do not need to maintain state ownership. The measure of transferring and selling SOEs will clearly have a more positive impact than the form of merger and consolidation due to the change in ownership; in addition, the measure of contracting business, leasing SOEs with the change in management rights but the ownership rights remain unchanged, so the impact on business performance may be lower than the measure of transferring and selling.

Through the implementation process, the measures of contracting out business and leasing state-owned enterprises were not really effective, and problems with agency costs arose due to conflicts between owners, in this case the State, and administrators. Therefore, since 2008, the form of contracting out business and leasing state-owned enterprises has been stopped and officially ended since the end of 2010. Regarding the measures of assigning and selling 100% state-owned enterprises, it continues to be identified as a measure to restructure state-owned enterprises; in addition, the Government (2014) added the form of enterprise transfer "which is the transfer of the right to represent the owner or the owner of a single-member limited liability company or a member company between the transferor and the transferee". However, the form of enterprise transfer does not actually change the structure of state ownership capital because it only transfers the right to represent the owner between ministries, provincial People's Committees or transfers the owners to economic groups and state-owned corporations.

* Converting state-owned enterprises into single-member LLCs

The conversion of state-owned enterprises into single-member LLCs has been carried out since 1999 under the Enterprise Law 1999, especially the Enterprise Law 2005.


prescribes a roadmap for converting all state-owned enterprises into single-member LLCs by 2010. However, this conversion does not change the ownership structure of the enterprise because the State still holds 100% of the charter capital; and has almost no impact on the operational efficiency of the enterprise, mainly aiming to complete a step in the process of creating an equal business environment, unifying operations according to the Enterprise Law among types of enterprises of all economic sectors.

* Formation of state economic groups and state corporations

The formation of parent companies - subsidiaries and the establishment of economic groups and state-owned corporations contribute to concentrating state investment resources on industries and fields that the state needs to hold; taking advantage of the synergistic effects of subsidiaries and affiliated companies. However, the synergistic effects can be both positive and negative depending on the performance of the system of subsidiaries and affiliated companies as well as the quality of corporate governance at the parent companies of economic groups and corporations.

* Equitization of state-owned enterprises

Equitization of SOEs is a fundamental and central measure in restructuring SOEs, which has been piloted since 1992. Accordingly, SOEs selected for equitization are small and medium-sized enterprises, profitable, and voluntarily registered to convert to joint stock companies (Decision 202/CT June 8, 1992); and on the basis of the 1995 Law on SOEs, the conversion of SOEs into joint stock companies has been officially regulated by the Government (Decree 28/CP dated May 7, 1996). This is a form of restructuring SOEs that completely changes the equity structure, converting SOEs from 100% state-owned capital to a multi-ownership form; thereby comprehensively affecting enterprises from governance, management to mobilizing and using economic and efficient resources, improving the operational efficiency of enterprises compared to before equitization. Many domestic and foreign studies on equitization have demonstrated the positive impact of SOE equitization on business performance.

* Restructuring state-owned enterprise finances in the form of restructuring capital and assets

Financial restructuring of state-owned enterprises is a measure that has a direct impact on the operational efficiency of each enterprise; however, the overall operational efficiency of the state-owned enterprise sector is not clearly demonstrated and difficult to measure. In fact, this measure can also be considered a component solution carried out simultaneously in the process of implementing forms of reform and innovation of state-owned enterprises such as equitization, assignment, sale, transfer, merger, consolidation or dissolution of enterprises. In terms of the impact of restructuring


Financially, enterprises that carry out equitization, transfer, and sale are enterprises with changes in ownership, which are the subjects that are greatly affected; while state-owned enterprises still hold 100% of charter capital, without changing the capital structure through the forms of merger, consolidation, and transfer, not only do they not thoroughly restructure their finances, but they may also suffer negative impacts from administrative decisions when implementing these forms. Therefore, with the research topic on ownership structure and performance of enterprises with state capital invested in Vietnam, it is unnecessary to study state-owned enterprises holding 100% of charter capital.

3.2. Ownership structure and performance of state-owned enterprises

invest in vietnam

3.2.1. Ownership structure of state-invested enterprises in Vietnam through the reform and innovation process

(1) Period 2011-2015

In the period of 2011-2015, the restructuring, arrangement and equitization of SOEs were carried out according to the Project "Restructuring of SOEs, focusing on economic groups and state-owned corporations in the period of 2011-2015" (Decision No. 929/QD-TTg dated July 17, 2012). According to the Projects on restructuring and innovating SOEs in the period of 2011-2015 approved by the Prime Minister, by 2015 the whole country needs to restructure 615 enterprises, of which 518 enterprises will be equitized. The results of the implementation period of 2011-2015 were that the whole country restructured 591 enterprises (reaching 96% of the plan). With the results of the period 2011-2015, the total number of SOEs reorganized from before to the end of 2015 was 5,950 enterprises, of which 4,460 enterprises were equitized. After reorganization, as of December 31, 2015, the whole country still had 778 enterprises with 100% of charter capital held by the State.

According to the Government (2016), the innovation and restructuring of SOEs in the 2011-2015 period has achieved many positive results:

- Total equity at state-owned enterprises increased by 52.3%, from VND810 trillion to VND1,234 trillion. Total assets increased by 36.5%, from VND2,274 trillion to VND3,105 trillion.

- Most state-owned enterprises are profitable in production and business. The summary of the 2014 operating results of 781 state-owned enterprises compared to 2011 shows that total revenue increased by 4%, total pre-tax profit increased by 26%, the pre-tax profit/equity ratio decreased by 2% but still reached about 16%, budget payment was 278 trillion, an increase of 34%, the debt-to-equity ratio was within the allowable limit. In the period of 2011-2015, the implementation of the State-owned enterprise restructuring project did not create any loss-making enterprises, and the projects were not successful.


effective, causing serious consequences such as Vinahshin, Phuong Nam Paper, Dinh Vu Fiber, Thai Nguyen Steel Phase 2, ...

According to the Government's assessment (2016), the restructuring of SOEs has basically focused on key sectors and fields, providing essential public products and services for society and national defense and security, and is an important material force for the State to regulate the macro-economy, ensure major balances of the economy, and contribute to promoting socio-economic development.

One of the important solutions in arranging, innovating and restructuring state-owned enterprises is equitization of state-owned enterprises. In the period of 2011-2015, the whole country has equitized 508 enterprises with a total actual enterprise value of 760,774 billion VND, of which the actual value of state capital is 188,274 billion VND, accounting for 24.7%. The total charter capital according to the approved equitization plan of 508 enterprises is 197,217 billion VND, of which the State holds 128,031 billion VND (equal to 65%); Strategic investors hold

31,065 billion VND (equal to 15.8%); Employees hold 4,042 billion VND (equal to 2%); Trade unions hold 1,124 billion VND (equal to 0.5%); public sale 32,931 billion VND (equal to 16.7%).

Table 3.3 Situation of equitization of state-owned enterprises in the period 2011-2015


Target

Total

add

Year

2011

Year

2012

Year

2013

Year

2014

Year

2015

Number of equitized enterprises

508

14

26

73

175

220

Total actual business value

Industry (billion VND)

760,771

431,568

5,758

25,963

139,465

158,017

In which: actual value of part

State capital (billion VND)

188,271

60,350

2,493

8,199

45,520

71,709

Actual business value

business/enterprise (billion VND)

1,498

30,826

221

356

797

718

Actual value of home equity

country/enterprise (billion VND)

371

4.311

96

112

260

326

Source: Government (2016)

Of the 508 enterprises whose equitization plans were approved, 414 enterprises completed the initial sale of shares with a total value of shares sold at par value of VND32,862 billion. The total charter capital after the initial sale of shares of the 414 enterprises was VND179,170 billion, of which the State held VND146,308 billion (equal to 81.7%); Strategic investors held VND11,903 billion (equal to 6.6%); Employees held

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