State investment firm integral to SOE reform
Sweeping changes to the state-owned enterprise reform are expected from the launching of State Financial Investment Co. (SFIC) planned in 2002.
The company establishment scheme has been made available by the finance ministry for consultation with government agencies before submission to the prime minister.
The prevalent capital subsidisation of SOEs by the state budget will be replaced by the new mechanism of state capital investments in transformed enterprises and ministries and agencies will be deprived from state administrative management of the enterprises.
Two options over the company’s model are introduced. First is a single SFIC subordinated to the finance ministry with six or eight local branches at big cities and provinces. The second option suggests that each provincial People’s Committee sets up a separate SFIC.
The finance ministry is partial to the first option as it predicts massive administrative costs if each province sets up their own SFIC.
Only equitised SOEs, those transformed into one-member limited liability companies and SOEs in joint ventures with foreign partners are slated for management by SFIC in the company’s initial phase.
Falling beyond the company’s management are the biggest SOEs in Vietnam—Corporations 90 and 91 including their subsidiaries—that have been instructed to change to a holding company model.
SFIC’s management of state capital will be conducted via its status as a shareholder in the transformed SOE by reallocating state investments and engaging in the capital and stock markets.
At transformed enterprises with a majority state stake, SFIC will take oversight of business strategy, investment projects as well as matters relating to labour, personnel and product pricing.
By contrast, SFIC will be a minor shareholder at enterprises without a state dominant stake.
As pointed out by finance officials, the launch of SFIC spells out the need to update a slew of legal documents: revisions are unavoidable to Decree 63/2001/ND-CP on transformation of SOEs into one-member limited liability companies for the purpose of transferring enterprise ownership from ministries, agencies and local People’s Committees to the SFIC. Likewise, the management of state capital at transformed SOEs according to Decree 73/2000/ND-CP will no longer belong to the finance ministry or local People’s committees as it will be taken over by the SFIC.
Category: Legal
