The Challenge of Losses in Vietnam's State-Owned Enterprises
In an effort to strengthen its national economy and enforce fiscal discipline, the government of Vietnam has initiated a comprehensive restructuring of its state-owned enterprises (SOEs). Reports from the end of last year indicated that the country had approximately 650 state-owned enterprises with a total combined asset value of roughly 4.6 trillion VND.
Despite this massive financial footprint, the operational performance of several companies remained far from optimal. Specifically, over 119 enterprises—representing more than 18 percent of the total—were operating at a loss, accumulating a staggering accumulated deficit of up to 47,000 billion Vietnamese Dong.
This mounting financial pressure prompted policymakers to reevaluate how state capital is deployed. The Politburo's Resolution 79 on developing the state-owned economy has consistently emphasized the need to concentrate resources and capital strictly on key strategic sectors to maximize national benefit.
Prime Minister's Decision No. 40 and Enterprise Classification
To operationalize these strategic directives, the Prime Minister issued Decision No. 40, which establishes clear criteria for determining where the state should maintain ownership, the required ownership thresholds, and which sectors allow for a reduction of state stake.
Under this decision, enterprises are categorized according to their industry and operational scope. Group 1 comprises enterprises operating in critical and strategic sectors where the state retains 100% equity. Group 2 includes sectors like aviation, seaports, finance, banking, and mineral exploitation where the state holds 65% or more of the capital. Group 3 covers areas such as petroleum and telecommunications, where state ownership ranges between 50% and 65%.
Expert Perspectives on Capital Concentration
Mr. Don Thanh Tuan, Deputy Director of the State-Owned Enterprise Development Department under the Ministry of Finance, emphasized the importance of targeted investment.
"For the best efficiency, to best promote economic development, and to avoid scattered or inefficient investments, it is crucial to concentrate state capital on key strategic sectors and industries." — Don Thanh Tuan, Deputy Director, SOE Development Department
Economic experts agree that the focus must shift from the sheer number of businesses to the value generated by each dollar of state capital. Associate Professor Dr. Ngo Tri Long from the Vietnam Association of Financial Consultants noted that state-owned enterprises must cut down on decentralized investments to fund vital national priorities properly.
Implementation and Future Outlook
This restructuring policy is already influencing major corporations like the Vietnam National Coal - Mineral Industries Group (TKV). With subsidiaries operating below 50% state capital, Decision No. 40 provides TKV with a solid foundation to review its investment portfolio and formulate a five-year capital restructuring plan.
As Vietnam continues to refine its economic policies, this structural overhaul is expected to alleviate public debt burdens, enhance corporate productivity, and foster a more resilient and transparent economy.
