Vietnamese State Owned Economic Groups and State Owned Corporations

Many current problems of Vietnam economy come from large  State-owned Economic Groups (SOE Group)  (Tập đoàn kinh tế nhà nước) and State-Owned Corporation (SOE Corp) (Tổng công ty nhà nước) such as Vinashin and Vinalines. In an effort to restructure these large State-owned enterprises, the Government just issued Decree 69/2014 in July 2014. Decree 69/2014 contains some important points on the management and structure of an SOE Group or SOE Corp as follows:

  • The group structure of a SOE Group and SOE Corp can only extend to up to three levels including the highest level being the parent company of the SOE Group or SOE Corp. This requirement would probably require current SOE Groups and SOE Corps to divest from subsidiaries which are not under direct control of the parent company or a direct subsidiary of the parent company within a SOE Group and SOE Corp. Decree 69/2014 sets a deadline of 1 September 2016 for the current SOE Groups and SOE Corps to do so;
  • The parent company of a SOE Group now must have a charter capital of VND 10,000 billion (about US$ 480 million). So a few small SOE Groups (e.g. Vinatex or Bao Viet) must either raise its charter capital by September 2017 or lose the status of an SOE Group;
  • Decree 69/2014 also requires a SOE Group to operate in both in Vietnam and foreign countries;
  • At least 50% of the subsidiaries within an SOE Group must operate within its core business and must account for at least 60% of the capital invested by the parent company to all subsidiaries of an SOE Group;
  • A member of the Members’ Council of the parent company in a SOE Group or SOE Corp must not be “leaders” within the State organisation, political or social organisation or subsidiaries of the parent company. It is not clear if this requirement is intended to prevent a manager of an SOE Group from holding concurrent offices in other State authorities or political organisations (including the Communist Party?); and
  • Decree 69/2014 provides that an Advisory Committee will be set up to provide “objective opinions and advices” on decisions to be made by an SOE Group or SOE Corp. The Advisory Committee may include experienced researchers or experts in related academic institutions. The Advisory Committee may provide some independent input and monitoring to operation of an SOE Group or SOE Corp. However, its advice is not binding and it is not clear whether members of the Advisory Committee are subject to any confidentiality or fiduciary obligations.