Reform of State-owned enterprises in Dong Nai

Mr. Truong Tan Sang discussing with the province’s leaders

During the visit on July 23 of Mr. Truong Tan Sang, member of the Politburo and head of the  CPV Central Committee’s Economic Commission to Dong Nai, he praised efforts made by Dong Nai in the restructing of state-owned enterprises. He also emphasized that Dong Nai should pay more attention the deepening of the reform of state-owned enterprises (SOEs) for an increase in business effectiveness and ensuring effective management of the reform of SOEs. He called SOEs pioneers of the global economy.

* Reform process of SOEs

Mr. Truong Tan Sang was pleased with the smooth progress being made in the reform of SOEs in Dong Nai and getting them out of difficulties, achieving a record high level in economic efficiency.

To date, a total of 27 SOEs in Dong Nai have been reorganized compared with target of 39 enterprises. Particularly, around 7 enterprises were transformed to state-run one-member limited liability companies while 20 others were equitised. Among these restructured enterprises, 3 were renamed General Corporations or holding companies that were allowed to operate with the application of parent-subsidiary model as of July 1, 2005 such as Dong Nai Food Industry, Donafoods and Sonadezi. According to report by the province’s Steering Board for SOE Renovation and Development, regulatory legal framework for function of equitized SOE was created for working effectively to fit with market-oriented economy. In addition, SOEs are playing the leading role in the national economy and involves in key industries as well as continue to contribute large sums to the State Budget. Remarkably, renovate and revitalize SOEs by making them released from bad debts that can not be re-paid, solving with redundant workers and inventing measures to prevent the regeneration of these problems; reforming and improving the productive efficiency of large State-owned corporations to build strong State-owned corporations. Most of equitised SOEs has recorded rapid growth rate in revenues. Especially, Dong Nai Painting Shareholding Company achieved an after-tax profit with an increase of 15% on average a year compared with 10% in the previous years. Viet Thanh Pottery Company earned up 10% in revenue while annual dividend payments increase by between 18-20% every year. Bien Hoa Wrapping Company’s profits rose by 20% against 2003.

* Proposed solutions:

Customers paying a visit to Viet Thanh Pottery Company

Dong Nai adopted in the reform of SOEs with the the state owning 51% in instead of 30%. Accordingly, management reform in equitized SOEs aimed to increase supervision of the state in operation of these companies.

In the other hand, one of the policy goals of this reform promotes further SOE reforms by transforming Dong Nai’s SOEs based on the large companies with a high capital assessment that can provide financial support to their subdiaries or affiliates. With application of parent and subdiary model, general corporations will create favorable conditions for their subdiaries and increase their competitiveness in world markets and ready to join WTO. The province plans to equitise another 12 SOEs to hit the target of 2005.

Dong Nai is the economic engine of the southern area of Vietnam and its industrial production accounted for 60% of the country‘s GDP. Therefore, the province should take full advantage of its potentials in the restructing of SOEs in order to gain best results.

Le Huong Thom