A ministry to supervise state owned economic groups?

17:02' 02/05/2008 (GMT+7)
According to Nguyen Dinh Cung, Head of the Macroeconomic Policy Department under the Central Institute for Economic Management (CIEM), it is now the right time to set up an agency at the ministerial level to supervise the operation of state owned economic groups and manage the state owned capital in enterprises.
Economic groups must focus on main business fields
MPI Minister: It’s necessary to control outward investments
What is your comment about the fact that economic groups are now tending to encroach on each other’s business fields, while neglecting their main business fields?
Nguyen Dinh Cung, Head of the Macroeconomic Policy Department under the Central Institute for Economic Management (CIEM)
In theory, the diversification of business that brings optimum profit to shareholders and the owners (the state, in this case) with the minimum cost, should be seen as a good thing.
However, experience shows that businesses should not diversify business spontaneously, but should thoroughly consider their competitive edges. Every business should have a forte business field, where it can gather its strength before thinking of expanding its business into other fields.
In general, the so-called ‘other business fields’ always have close links with main business fields. For example, garment companies think of producing materials, while transport companies think of export services, while they should not think of jumping into the real estate market.
However, in fact, I know some groups are ready to pay VND100bil to set up an online newspaper, a TV channel or media company.
As the owner of the economic groups and general corporations, the state needs to appraise the outward investments by the groups and corporations and make decisions on whether to allow them to implement the projects. This is the right and the responsibility of the owner.
One of the big worries experts have pointed out is that economic groups tend to establish their own banks which will lend to other members in the groups. The government has given the nod to the establishment of PetroVietnam Bank. What do you think about this?
I think that Vietnam is following Japan’s corporate governance model, in which the corporate governance is based on the bank as the centre. However, the difference is that in Japan, the banks are not set up by enterprises, but were established a long time ago by imperial families and are now operating as big joint stock companies.
The banks make very few investments in big corporations and economic groups, just 1-2% of total investments.
Some experts say that the establishment of banks under economic groups should be allowed if the banks can bring profit. Do you agree with the viewpoint?
No, I don’t, because there exist conflicts of interest. Economic groups, as the owners of the banks, have the right to order the banks to provide loans to one project or another, while not considering the efficiency of the capital use. That is the biggest risk of the interest conflict.
I think that private run economic groups can establish their own banks, while state owned groups should not.
What is your viewpoint about the need to separate the roles of the state as management agency and owner of enterprises?
I think that we must separate the two roles of the state. Ministries should not undertake the role of the owner of enterprises. We strongly recommend the establishment of a ministry which takes the responsibility of managing state owned capital in enterprises.
The operational State Capital Investment Corporation (SCIC) does not take on this role well in the current circumstances. I mean that the ministry should have competence, capability and political position to undertake the capital management, but the operation of the ministry does not link to the state management work.