Directive No. 20/1998/CT-TTg On Promoting the Reorganization and Modernization of State-Owned Enterprises

DIRECTIVE

On Promoting the Restructuring and Reform of State-Owned Enterprises

In recent years, the Government has implemented many policies and guidelines to organize, restructure, enhance business autonomy, responsibility for capital preservation and development, improve operational efficiency of state-owned enterprises, and has achieved significant results.

However, currently compared to 1995, economic growth targets, profits, tax payments, and competitive capabilities of state-owned enterprises show signs of stagnation and decline in some sectors and localities. Enterprises suffering prolonged losses that have lost their ability to sustain operations have not been resolved definitively; poorly performing enterprises still account for a large proportion; the process of shareholding reform is proceeding too slowly. The structure of state-owned enterprises has not been reformed sufficiently and is still overly fragmented. The competitiveness of enterprises on regional and international markets remains weak.

To accelerate industrialization, modernization, and integration into the global economy, and to implement the Resolution of the Fourth Plenary Session of the Central Committee of the Party (Term VIII) on continuing reforms and enhancing the effectiveness of state-owned enterprises, the Prime Minister requests Ministries, sectors, localities, and State-owned Corporations established under Decision No. 91/TTg dated March 7, 1994 (hereinafter referred to as Corporation 91) to implement the following tasks:

Chapter I. Urgently carry out classification and continue restructuring state-owned enterprises.

1. Heads of Ministries, heads of agencies equivalent to Ministries, heads of agencies under the Government, Chairmen of People's Committees of provinces and centrally-administered cities, and Boards of Directors of Corporation 91 shall assess specifically the operational situation of state-owned enterprises directly under them since the implementation of the restructuring plan according to Directive No. 500/TTg of

a. Group One: includes important enterprises that need to maintain operations according to the Law on State-Owned Enterprises to play a core and leading role in the process of industrialization and modernization. These are enterprises that need to maintain 100% state capital and certain carefully selected state-owned enterprises engaged in production and business activities in sectors that need to be listed but have not yet had the conditions to do so from now until 2000, such as State Corporations (except for the listing of some member enterprises of the Corporation) and other important enterprises with significant roles in economic balances (refer to the Appendix attached to this Directive). Enterprises in this group need to be focused on improving organizational structures, personnel, and finances; prioritizing the provision of at least 30% of the required working capital; creating conditions for active capital mobilization and capital preservation to continuously update equipment and technology, expand production scale, and enhance business operation efficiency. For public service enterprises: based on Decree No. 56/CP dated October 2, 1996 of the Government, determine specific lists and report

b. Group Two: includes enterprises that need to change ownership structures. These are enterprises that do not need to maintain 100% state capital. Within this group, it is necessary to clearly distinguish enterprises that need to maintain controlling shares or special shares of the state, with state representatives playing a management role (refer to the Appendix attached to this Directive). In the plan for the listing of state-owned enterprises in 1998-1999, each Ministry, locality, and Corporation 91 must select at least 20% of independently-accounted or dependent-accounted enterprises that do not need to maintain 100% state capital for listing and submit these plans to the Central Steering Committee for Listing before May 31, 1998 for consolidation and submission.

c. Group Three: includes enterprises suffering prolonged losses. These are enterprises that have incurred losses for two consecutive years or more, unable to repay maturing debts, pay sufficient taxes to the state, or contribute adequately to social insurance and other funds as prescribed. Enterprises in this group will be handled as follows: If the enterprise has a market for its products but lacks capital or has poor management capability, the agency responsible for establishing the enterprise should consider support measures and firmly replace managers to improve management. Subsequently, measures to change ownership structures will be implemented. If the enterprise cannot overcome its difficulties, it will be sold through auction or dissolved. When implementing dissolution procedures, the agency responsible for establishing the enterprise must pay attention to recovering and repaying outstanding debts to avoid causing difficulties for related enterprises. In cases of bankruptcy, the matter will be resolved according to the Bankruptcy Law of Enterprises. The Ministry of Planning and Investment, in coordination with the Economic Court of the Supreme People's Court, will report to the Prime Minister on the implementation of the Bankruptcy Law of Enterprises and propose measures to resolve obstacles to ensure that the implementation of the Bankruptcy Law truly helps resolve enterprise debt situations in accordance with the law and transfer remaining valuable assets to other entities operating more effectively.

2. Proposals for the classification and continued restructuring of state-owned enterprises by each Ministry, sector, Corporation 91, and locality must be completed by December 30, 1998 (for Hanoi and Ho Chi Minh City, completion must be by June 30, 1998) and approved according to the following regulations:

3. Establish some central task forces to coordinate with task forces in localities with many state-owned enterprises to guide and urge the implementation of the above solutions.

Chapter II. Consolidating and Improving the Organization of State Corporations (including corporations operating under the model set forth in Decisions No. 91/TTg and No. 90/TTg dated March 7, 1994 of the Prime Minister).

1. The Central Steering Committee for Enterprise Reform shall coordinate with the Government’s Organizational and Cadre Affairs Board, relevant Ministries, and People's Committees of provinces and centrally-administered cities to closely monitor the specific situation of each state corporation to promptly address organizational management weaknesses, quickly supplement sufficient leadership personnel to enhance the management capacity of the corporation; summarize pilot experience in establishing financial companies within state corporations to expand such practices; assess the implementation of the operational regulations of the Board of Directors and the relationship between the Board of Directors and the General Director to provide guidance and make appropriate adjustments. In 1998, it is necessary to select 2-3 state corporations to pilot the system of entrusting the Board of Directors with the selection and hiring of the General Director (Director) to draw lessons for replacing the appointment system of the General Director (Director). The Ministry of Planning and Investment must urgently prepare and submit for approval.

2. Further strengthen the role of state corporations in developing strategies and plans for development, organizing coordination, and supervising based on promoting the initiative and creativity of member enterprises. The state corporation must be a unified entity that leverages the comprehensive strength of the entire corporation, overcoming the fragmented operations of member enterprises. For member enterprises that operate effectively and stably, more decentralization should be granted. For weak and unstable member enterprises, measures to rectify and reorganize must be developed; when there is positive progress, the scope of decentralization will be expanded.

3. Admitting new members or removing existing members from state corporations must be considered on a case-by-case basis based on economic and social efficiency. For state corporations with many loss-making member enterprises that have been rectified by the corporation and supported by the State but still show no positive changes, restructuring or dissolution of the corporation should be considered.

4. Strictly implement the decentralization provisions of the Government for state corporations. Cease direct intervention by sectoral ministries and functional ministries in the business operations of state corporations and their member enterprises while strengthening the State management functions of ministries, provincial people's committees, and centrally-administered city people's committees over state corporations according to the law, but manage other economic sectors.

5. Ministries, agencies under the Government, provincial people's committees, and centrally-administered city people's committees, and the 91 corporations shall conduct a summary of the implementation of the state corporation model and submit it to the Central Steering Committee for Enterprise Reform for consolidation and submission to the Government at the end of the second quarter of 1998.

Chapter III. Implementing Measures to Improve the Financial Health of State Enterprises to Create Conditions for Enterprises to Accurately Account for and Fulfill Their Responsibilities for the Preservation and Development of State Capital Assigned to Them.

The Ministry of Finance shall lead and coordinate with the General Statistics Office and the Government’s Price Board to guide Ministries, sectors, localities, and the 91 corporations to accurately determine the value of assets under the control of state enterprises based on market prices. Clearly analyze the reasons for overdue debts and accumulated materials to propose decisive measures for resolution. For reasons attributable to the implementation of policies by superiors but not immediately resolved, temporarily categorize them separately in the balance sheet for gradual resolution on a case-by-case basis. For reasons attributable to the enterprise's responsibility, the enterprise must proactively resolve them according to current State regulations. The determination of asset values is primarily carried out by the enterprise under the guidance of the Ministry of Finance regarding professional matters. The plan needs to be urgent but focused. Enterprises with many unresolved issues should be prioritized. Enterprises that have accurately valued their assets mainly rely on the conclusions of independent audits of annual asset summaries.

Chapter IV. Formulating Plans for Technological Innovation and Improving Management to Enhance Competitiveness in the Process of International Integration.

Along with restructuring state-owned enterprises, ministries, sectors, localities, and General Corporation 91 shall instruct subordinate enterprises to base their plans for international integration over a five-year period on Vietnam's progress in joining international organizations, international commitments, and guidelines from the Ministry of Trade and the Ministry of Finance regarding international practices (particularly the ASEAN Free Trade Area - AFTA, the Asia-Pacific Economic Cooperation Forum - APEC, and the World Trade Organization - WTO), and the phased tariff reduction schedule announced by the Government. All enterprises must fully understand the requirements of international integration to proactively formulate and implement plans promptly, firmly, and effectively. State management agencies must create favorable conditions for enterprise production and business activities during the process of researching and issuing policies and organizing implementation, in accordance with the spirit of Directive No. 16/1998/CT-TTg dated March 31, 1998, of the Prime Minister on addressing the recommendations of enterprises in three meetings with the Prime Minister at the beginning of 1998. The Ministry of Planning and Investment will provide specific guidance on the content and methods of formulating international integration plans for enterprises and submit to the Government a strategic plan for phased international integration and annual targets for state agencies and enterprises to coordinate in implementing.

Chapter V. Improving the Mechanism for Managing State-Owned Enterprises.

Within their respective functions, ministries and sectors must urgently organize the implementation of Decision No. 61/1998/QĐ-TTg dated March 16, 1998, of the Prime Minister on the program of action of the Government to implement Resolution of the Fourth Plenary Session of the Central Committee of the Communist Party of Vietnam, Eighth Term, to create momentum for enterprise development and ensure the role of state control. They must promptly submit to the Government for consideration and supplementation or amendment of existing decrees and decisions of the Government and the Prime Minister according to the assigned schedule to timely resolve difficulties in investment, production, and business operations of enterprises. The Ministry of Planning and Investment will study draft amendments to the Law on State-Owned Enterprises for the Government to submit to the National Assembly in 1998. The Ministry of Labor, Invalids, and Social Affairs will soon submit to the Government a decree on handling surplus labor during the restructuring of state-owned enterprises. The Central Steering Committee for Enterprise Reform will take the lead, in coordination with the Ministry of Justice, the Office of the Government, and related agencies, to examine and ensure the consistency of relevant documents on enterprise reform before submitting them to the Prime Minister. Ministers of ministries, heads of agencies equivalent to ministries, heads of government-affiliated agencies, Chairpersons of People's Committees of provinces and centrally-administered cities, and Boards of Directors of General Corporations 91 are responsible for implementing this directive.

The Ministry of Labor, Invalids, and Social Affairs will soon submit to the Government a decree on handling surplus labor during the restructuring of state-owned enterprises.

The Central Steering Committee for Enterprise Reform will take the lead, in coordination with the Ministry of Justice, the Office of the Government, and related agencies, to examine and ensure the consistency of relevant documents on enterprise reform before submitting them to the Prime Minister.

Ministers of ministries, heads of agencies equivalent to ministries, heads of government-affiliated agencies, Chairpersons of People's Committees of provinces and centrally-administered cities, and Boards of Directors of General Corporations 91 are responsible for implementing this directive.

ANNEX

AREAS THAT HAVE NOT YET UNDERGONE SHAREHOLDERIZATION OR WHERE THE STATE NEEDS TO MAINTAIN CONTROLLING SHARES OR SPECIAL SHARES

(APPLICABLE TO CURRENT ENTERPRISES)

(Annexed to Directive No. 20/1998/CT-TTg dated April 21, 1998)
of the Prime Minister)

1. Current state-owned enterprises that have not undergone shareholderization.

State-owned enterprises operating public services as stipulated in Article 1 of Decree No. 56/CP dated October 2, 1996, of the Government. For enterprises with capital under 10 billion dong, the authority deciding on the establishment of the enterprise may consider and decide on appropriate restructuring forms.

Production of products and provision of services that the State has a monopoly on: explosives, toxic chemicals, radioactive materials, silver printing and certificates of value, national and international trunk communication networks.

2. Current state-owned enterprises where the State needs to maintain controlling shares or special shares when undergoing shareholderization:

Public service enterprises with capital over 10 billion dong,

Mining rare minerals;

Large-scale mining of mineral resources;

Oil and gas exploration;

Production of fertilizers, pesticides, pharmaceuticals, and chemical drugs;

Large-scale production of colored metals and rare metals;

Large-scale electricity generation, transmission, and distribution;

Aircraft maintenance;

Postal and telecommunications (excluding industrial and construction sectors);

Railways, air transport, and ocean transport;

Large-scale printing, publishing, alcohol, beer, and tobacco production.

Investment banks, banks for the poor.

Note: The establishment of new joint-stock companies shall be carried out in accordance with the provisions of the Company Law.

DEPUTY PRIME MINISTER 

(Signed) 

Ngô Xuân Lộof