12. State-Owned Enterprise Reform in Viet Nam: Progress and Challenges

The state-owned-enterprise (SOE) sector is one of pillars in Vietnamese economy. It accounts for 28% of GDP, contributes nearly 30% of the state budget (General Statistics Office 2018), comprises 17% bank credit, and at the same time this sector is responsible for 60% of non-performing loans in the economy (Phang 2013). In order to achieve the goal of being a market-based economy with a socialist orientation, the Government of Viet Nam has encouraged the active participation from the private sector in coupling with SOE reform to enhance their effectiveness and efficiency since the 1980s. Over the past 30 years, SOEs have contributed noticeably to the achievements of the “Doi Moi” which lifted the country out of socioeconomic crisis to move to the era of industrialization and modernization under the socialist orientation. However, this transition has posed enormous challenges to SOEs that adversely impact on the sustainability of economic development due to the low speed of their reforming and restructuring. Through the 30-year SOE privatization, the number of SOEs has declined significantly and they now tend to focus on crucial and core sectors of the economy, including electricity, minerals, petroleum, finance, food and telecommunications. There are successful cases of post-privatized SOEs, with improvement in enterprises’ profitability and competitiveness; expanded production capacity; raised expertise and management competency; and some new industries and enterprises have been gradually formed with modern technology and advanced management. At the same time, the privatization process has encountered a number of impediments from the complexity of enterprise valuation, a lack of stringent regulations in information dissemination, a defective and deficient performance evaluation system and a lack of enabling stock market. This paper evaluates the performance of SOE reform in Viet Nam, clarifying its hindrances and drawbacks, and then proposes possible solutions to foster the SOE privatization process, replace the ownership capital of government effectively, and to shift to a more efficient and diversified economic system.