Decision No. 271/2003/QĐ-TTg On Issuing the Supervision and Evaluation Regulation for State-Owned Enterprises' Operations

DECISION OF THE PRIME MINISTER

Regarding the issuance of the Supervision and Evaluation of State-Owned Enterprise Operations Regulation

of state-owned enterprises

PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Law on State-Owned Enterprises No. 14/2003/QH11 dated November 26    2003;

Pursuant to the Enterprise Law No. 13/1999/QH10 dated June 12, 1999;

At the proposal of the Minister of Finance,

DECISION:

Article 1. This Decision promulgates the Regulation on supervision and evaluation of state-owned enterprise operations.

Article 2. This Decision takes effect fifteen days from the date of publication in the Official Gazette.

Article 3. The Minister of Finance shall take the lead in guiding the implementation of this Regulation together with relevant ministries and agencies.

The ministers, heads of ministerial-level agencies, heads of agencies under the Government, chairpersons of provincial People's Committees, State Capital Corporation Chairpersons, General Directors, and Directors of state-owned enterprises are responsible for implementing this Decision.

REGULATIONS

SUPERVISION AND EVALUATION OF STATE-OWNED ENTERPRISE OPERATIONS
OF STATE-OWNED ENTERPRISES

(Issued together with Decision No. 271/2003/QĐ-TTg dated December 31, 2003 of the Prime Minister)

Purpose of supervision and evaluation of state-owned enterprise operations

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

Article 1. 1. Supervision of state-owned enterprises (hereinafter referred to as enterprises) aims to promptly grasp the current situation and effectiveness of enterprise operations to assist enterprises in addressing shortcomings, achieving business goals and plans, public service tasks, enhancing production and business efficiency, and competitiveness; while contributing to improving mechanisms, policies, and laws.

2. Evaluation of the effectiveness of enterprise operations aims to classify enterprises and implement material and spiritual incentives for enterprises and managers who operate effectively; and timely address enterprises and managers who perform poorly.

Basis for implementing supervision and evaluation of enterprise operations

Article 2. 1. Supervision of enterprises is carried out according to this Regulation and relevant laws.

2. Evaluation of the effectiveness of enterprise operations is conducted based on the criteria stipulated in this Regulation.

Objectives of supervision and evaluation of enterprise operations

Article 3. 1. State-owned companies;

2. State-owned joint-stock companies;

3. Enterprises with controlling shares or capital contributions from the State;

4. Single-member state-owned limited liability companies;

5. Multi-member state-owned limited liability companies.

Financial, banking, and insurance enterprises are not subject to this Regulation.

1. "Supervision of enterprises" refers to the monitoring and inspection of enterprises in their business activities, public service activities, and compliance with laws and regulations.

Article 4. Definitions

2. "Evaluation of the effectiveness of enterprise operations" involves using criteria to determine the effectiveness of operations and classify enterprises.

3. "Evaluation criteria" refer to a system of indicators and standards used to comprehensively and objectively determine the effectiveness of operations and classify enterprises.

II. SUPERVISION OF ENTERPRISES

Self-supervision by enterprises

Article 5. 1. Self-supervisors

Internal self-supervisors within enterprises are managers, operators, and employees. These entities use internal auditing, specialized departments, people's inspection teams, trade unions, and employee congresses for supervision. Internal supervision is conducted in accordance with the Law on State-Owned Enterprises, the Enterprise Law, financial management regulations, democratic implementation regulations, internal audit regulations, enterprise charters, and other regulatory documents.

2. Purpose of supervision Enterprises monitor their operational developments to promptly identify issues and prevent and rectify violations and risks in production and business; make decisions on management and operation, implement measures, or recommend actions to the owners or competent state authorities for matters beyond the enterprise's jurisdiction.

3. Content of supervision

a) Monitoring the mobilization, utilization, and distribution of enterprise resources including assets, materials, goods, funds, labor, revenue, profits, distribution of production and business results, and other resources during the enterprise's operations;  b) Monitoring the recruitment, utilization, and payment of wages to employees; the use of incentive funds, welfare funds, reserve funds for unemployment benefits, and other employee rights;

c) Verifying the reliability of financial reports, other reports, and economic and financial information as prescribed. Identifying weaknesses and deficiencies in the management and operation systems of enterprises;

d) Monitoring compliance with laws; resolutions and decisions of owners, managers, and operators. Evaluating the effectiveness and impact of managers' and operators' resolutions and decisions, the effectiveness of management and operation, the capabilities and effectiveness of management, production, and business units, and the overall effectiveness of the enterprise.

Supervision by owners

1. Supervisors

For state-owned companies and single-member state-owned limited liability companies:

Article 6. Organizations authorized by the Government as owners of enterprises carry out supervision and evaluation of enterprise effectiveness according to their functions, duties, and powers. Specifically:

State Capital Corporation Boards supervise state-owned limited liability companies and independent accounting subsidiaries of state-owned corporations and parent companies as stipulated in Clause 3 of this Article;

a)  Provincial People's Committees supervise state-owned corporations and independent state-owned companies under their jurisdiction as stipulated in Clause 3 of this Article;

Central Ministries and Agencies supervise state-owned corporations and independent state-owned companies established by the Prime Minister or central ministries and agencies as stipulated in points a, b, and c of Clause 3 of this Article.

The State Capital Corporation Councils, parent companies shall perform supervisory functions as prescribed in Clause 3 of this Article with respect to state-owned joint stock companies with one member, independent accounting subsidiaries under State Capital Corporations, and parent companies.

Provincial People's Committees, municipal people's committees directly under the central government shall perform supervisory functions as prescribed in Clause 3 of this Article with respect to corporations, independent state-owned enterprises under provincial people's committees, municipal people's committees directly under the central government.

Ministries and central-level agencies shall perform supervisory functions as prescribed at points a, b, and c of Clause 3 of this Article with respect to state capital corporations, independent state-owned enterprises established by the Prime Minister or ministries, central-level agencies.

As for state-owned joint stock companies with one member where ministries and central agencies are the representatives of the owners, they shall implement supervision according to the contents prescribed in Clause 3 of this Article.

The Ministry of Finance shall perform its supervisory function according to the content prescribed at point d, Clause 3 of this Article for State-owned corporations and independent enterprises established by the Prime Minister or ministries and central agencies.

b) For other state-owned enterprises as provided for in the Law on State-Owned Enterprises:

Shareholders or shareholders shall perform the owner's supervisory functions according to the contents prescribed in Clause 3 of this Article, the provisions of the Enterprise Law, and the enterprise charter.

3. Content of supervision

The owner shall conduct regular, systematic supervision of the activities and financial management of the enterprise to promptly and fully grasp the advantages, difficulties, and existing issues of the enterprise and take measures to address them, thereby enhancing the competitiveness and efficiency of capital utilization of the enterprise.

c) Verifying the reliability of financial reports, other reports, and economic and financial information as prescribed. Identifying weaknesses and deficiencies in the management and operation systems of enterprises;

a) The organization of business operations and the performance of tasks by the management and operation machinery of the enterprise;

b) The implementation of goals, strategies, annual and long-term production and business plans of the enterprise;

c) Compliance with resolutions and decisions of the owner, the Board of Directors, and the enterprise charter. Evaluate the effectiveness of the owner's resolutions related to ownership rights over the enterprise's activities;

d) Business operation results, capital utilization efficiency, and debt repayment capability of the enterprise.

Article 7. State management agency supervision

State Capital Corporation Boards supervise state-owned limited liability companies and independent accounting subsidiaries of state-owned corporations and parent companies as stipulated in Clause 3 of this Article;

Ministries, central agencies, provincial People's Committees, and centrally-administered city People's Committees shall supervise enterprises according to their state management functions without overlapping or causing undue inconvenience to the enterprises' operations.

3. Content of supervision

State management agencies shall carry out supervision of enterprises to promptly identify and handle obstacles and violations in the implementation of the State's policies, laws, and directives within the enterprises;while simultaneously amending, supplementing, or proposing relevant authorities to amend and supplement the State's policies and laws.

c) Verifying the reliability of financial reports, other reports, and economic and financial information as prescribed. Identifying weaknesses and deficiencies in the management and operation systems of enterprises;

Supervise the implementation of the State's policies, laws, and directives within the enterprises and evaluate the situation and effectiveness of the enterprises' operations according to their functional and task assignments.

Article 8. Forms of enterprise supervision

1. Internal supervision from within the enterprise is self-organized internal supervision conducted by the enterprise itself.

2. External supervision is organized by the owner and state management agencies. External supervision is carried out in two forms:

a) Indirect supervision involves monitoring and inspecting the enterprise's activities through financial reports, statistics, and other reports as prescribed by law and the owner;

b) Direct supervision involves inspecting and understanding the situation directly at the enterprise.

Direct supervision at the enterprise is implemented according to current regulations on inspection work for enterprises.

Supervisors may utilize consulting firms such as financial accounting consulting firms, tax consulting firms, independent auditing firms, asset evaluation firms, etc., to conduct supervision and evaluation of the enterprise.

3. Pre-, during, and post-operation supervision:

a) Pre-operation supervision involves checking the feasibility of short-term and long-term plans; investment projects, construction projects, external investments, funding mobilization schemes, and other projects and schemes;

b) During-operation supervision involves monitoring and inspecting the implementation process of the enterprise's plans and projects, and implementing  legal and owner-prescribed regulations;

c) Post-operation supervision involves checking the enterprise's operational results based on periodic reports; compliance with owner decisions or enterprise charters; adherence to legal regulations.

Article 9. Rights and obligations of enterprises during the supervision process

1. Rights of enterprises

a) To develop annual production and business plans, financial plans as a basis for supervision and evaluation of management and operational results of the enterprise;

b) To request the owner and state management agencies to properly implement supervisory regulations for the enterprise; to refuse inspections that do not comply with legal regulations;

c) To propose or lodge complaints with supervisory agencies regarding supervisory conclusions, evaluations, and solutions proposed by these agencies if deemed inappropriate and affecting the evaluation results or the enterprise's operations;

d) To propose state management agencies and policy drafting agencies to supplement, amend, and perfect policies and laws for enterprises in accordance with reality, creating favorable conditions for enterprise development, improving management quality, and operational efficiency;

đ) To hire financial accounting service organizations, independent auditing firms to perform self-supervision functions;

e) To exercise other rights as prescribed by law.

2. Obligations of enterprises

a) To explain the operation process, financial management work, and compliance with state policies and laws; to provide truthful, complete, and timely economic, financial information, plan indicators, periodic and ad hoc reports as required by current regulations to the owner and state management agencies for their supervision purposes. To create all favorable conditions for the owner and state management agencies' supervision;

b) To comply with the final supervisory requirements and conclusions of the owner and state management agencies and report on the implementation of these requirements and conclusions;

c) To fulfill other obligations as prescribed by law.

Article 10. Tasks and powers of the owner in supervision activities

1. Tasks and powers of the owner towards state-owned companies and state-owned joint-stock companies with one member:

a) Closely and regularly monitor each enterprise under its management to promptly identify any issues and difficulties of the enterprise and direct the enterprise to find solutions or provide solutions to help the enterprise overcome them;

b) Require enterprises to submit complete and timely periodic plans and reports, as well as ad hoc reports for research, analysis, and synthesis to serve monitoring purposes;

c) Organize inspections according to plans or unexpectedly when necessary. Inspections shall be conducted on specific topics or comprehensively on the activities of the enterprise in accordance with the inspection procedures prescribed by law;

d) Provide comments, evaluations, and conclusions on the monitored contents; require enterprises to propose or implement corrective measures based on the monitoring conclusions;

đ) Annually organize comprehensive analysis and evaluation of the enterprise's activities; simultaneously, compile the evaluation results reported by the enterprise to relevant state agencies;. The Ministry of Finance shall stipulate this reporting regime;

2. Duties and powers of the owner towards other state-owned enterprises as provided for in the Law on State-Owned Enterprises;

The owner of the enterprise shall exercise rights and fulfill obligations in accordance with the provisions of the law and the Company Charter to supervise in accordance with this Regulation;

Article 11. Duties and powers of state administrative agencies in supervisory activities;

1. Receive reports and opinions from enterprises reflecting policies and laws concerning enterprises; organize surveys and evaluations of the impact of state policies and laws on enterprises;

2. Organize supervision of enterprises in accordance with their functions and tasks, guide enterprises to understand and comply with state policies and laws;

3. Require enterprises to promptly rectify deficiencies and shortcomings, strictly implement state policies and laws;

4. Use the results of supervision to amend, supplement, issue, or submit to competent authorities for issuance of policies and systems for enterprises;

5. Compile and report to the Prime Minister on the implementation status and impact of state policies and laws on the activities of enterprises;

6. Maintain confidentiality of enterprise information in accordance with the provisions of the law;

III. EVALUATION OF ENTERPRISE ACTIVITY EFFECTIVENESS

Article 12.  System of Indicators for Evaluating Enterprise Activity Effectiveness

1. The evaluation of enterprise activity effectiveness is based on the following indicators:

a) Revenue and other income. For enterprises mainly producing key products of the economy such as electricity, coal, oil and gas, cement, the sales volume indicator of the product during the period shall be applied;

b) Realized profit and the profit margin realized on state capital;

c) Overdue liabilities and ability to pay maturing debts;

d) Compliance with regulations, policies, and laws on: taxes and payments to the state budget, credit, insurance, environmental protection, labor, wages, financial systems, accounting, auditing, financial reporting, and other reports;

đ) Implementation of public goods and services;

2. The indicators specified in Clause 1 of this Article are determined and calculated from data in financial statements and regular statistical reports as currently prescribed. When calculating indicators a, b, d, đ, factors affecting these indicators shall be excluded, including:

a) Due to force majeure;

b) Due to investment expansion in production affecting profits in the first two years since the investment project is put into operation;

c) Due to state price adjustments (for products with state-set prices) affecting enterprise revenue; 

Article 13. Evaluation Method

1. Indicator 1: Revenue and other income compared to the previous year for each industry as follows:

a) Agriculture, forestry, fisheries, mining industry (excluding oil and gas extraction), mechanical industry (producing metal products, machinery, equipment):

Increase by 5% or more: classified as A;

Increase or decrease less than 5%: classified as B;

Decrease by 5% or more: classified as C;

b) Processing and manufacturing industry, power generation and distribution, natural gas, clean water, construction, oil and gas extraction, transportation, warehousing, telecommunications, commerce,  tourism, hotels, and other industries:

Increase by 7% or more: classified as A;

Increase less than 7%, decrease less than 3%: classified as B;

Decrease of 3% or more: classified as C.

2. Indicator 2: Realized profit and the profit margin realized on state capital:

a) Enterprises making a profit and:

- The profit margin realized on state capital increases compared to the previous year: classified as A;

- The profit margin realized on state capital is equal to or lower than the previous year: classified as B;

b) Enterprises making a loss: classified as C;

c) For enterprises with planned losses, the Ministry of Finance will provide separate guidance;

3. Indicator 3: Overdue liabilities and ability to pay maturing debts:

a) Enterprises without overdue liabilities and with a debt repayment capability ratio greater than 1: classified as A;

b) Enterprises without overdue liabilities and with a debt repayment capability ratio between 0.5 and 1: classified as B;

c) Enterprises with overdue liabilities or a debt repayment capability ratio less than 0.5: classified as C;

The current debt repayment capability ratio of the enterprise is determined by the total value of current assets and short-term investments compared to the total amount of short-term debt including long-term debt that has matured;

4. Indicator 4: Compliance with current laws and regulations:

a) Enterprises without violations of current laws and regulations: classified as A;  b) Enterprises with conclusions from competent authorities regarding violations of current laws and regulations but not at the level requiring administrative penalties: classified as B;

c) Enterprises subject to administrative penalties for non-compliance with laws and regulations or managers with illegal actions during the performance of their duties to the extent of being criminally prosecuted: classified as C;

c) An enterprise that is subject to administrative penalties for non-compliance with laws or the management personnel of the enterprise has committed acts of violating the law during the performance of their duties to the extent that they are pursued for criminal responsibility: classified as Category C.

5. Indicator 5: Implementation of public goods and services:

a) Exceeding targets in terms of quantity and quality of products or services meeting prescribed standards: classified as A;

b) Completion in terms of quantity with product and service quality meeting prescribed standards: classified as Category B;

c) Failure to complete quantity or product and service quality not meeting prescribed standards: classified as Category C.

Article 14. Classification of enterprises

1. For trading enterprises, based on the classification results for each criterion 1, 2, 3, and 4 stipulated in Article 13 of this Regulation, classify each enterprise into Categories A, B, or C as follows:

a) An enterprise classified as Category A is an enterprise without any criterion classified as Category C, wherein criterion 2 and criterion 4 are classified as Category A;

b) An enterprise classified as Category C is an enterprise with criterion 2 or three remaining criteria classified as Category C;

c) An enterprise classified as Category B is an enterprise that has not been classified as Category A or Category C.

2. For enterprises established and operating regularly and stably, primarily providing public goods and services, based on  the classification results for each criterion 3, 4, and 5 stipulated in Article 13 of this Regulation, classify  each enterprise into Categories A, B, or C as follows:  a) An enterprise classified as Category A is an enterprise without any criterion classified as Category C and having criterion 5 classified as Category A;

b) An enterprise classified as Category C is an enterprise with criterion 5 classified as Category C or having criterion 5 classified as Category B and criteria 3 and 4 classified as Category C;

3. For State-owned Corporations, based on the classification results of member enterprises, classify as follows:

c) An enterprise classified as Category B is an enterprise that has not been classified as Category A or Category C.

a) A Corporation classified as Category A is a Corporation where member enterprises classified as Category A account for more than 50% of the total revenue of the Corporation;

b) A Corporation classified as Category C is a Corporation where member enterprises classified as Category C account for

more than 50% of the total revenue of the Corporation;  c) A Corporation classified as Category B is a Corporation that does not fall into the above categories.

Guidance and announcement of state enterprise classifications

Article 15. 1. The Ministry of Finance shall take the lead in guiding specific methods and conditions for calculating the criteria stipulated in Article 13 of this Regulation.

Ministries, central agencies, and provincial People's Committees shall classify enterprises under their management according to economic sectors to apply criterion 1 as prescribed at

Article 13 of this Regulation.  2. Based on the provisions of this Regulation and guidance documents from ministries, agencies, and organizations, enterprises shall self-assess and classify themselves annually; report to relevant agencies as stipulated in Clause 3 of this Article for review and announcement of classification results. This report shall be submitted together with the annual financial report of the enterprise as currently regulated.

3. In the second quarter of the following year, ministries, central agencies, provincial People's Committees, State Corporation Boards of Directors, and parent companies shall conduct reviews and announce the previous year's classification results of enterprises under their jurisdiction. The classification of State Corporations or parent companies shall be announced after receiving comments from the Ministry of Finance.

Agencies and organizations as stipulated in Clause 3 of this Article shall report annual enterprise classification results to the Ministry of Finance for consolidation and reporting to the Prime Minister.

Based on the enterprise classification results, rewards and penalties shall be implemented as follows:

Article 16. Rewards and disciplinary actions

1. Enterprises classified as Category A or B, their management boards shall be rewarded based on the business performance of the enterprise

as follows:  a) For state-owned companies:

Ministries, central agencies, provincial People's Committees shall decide the reward amount for the Board of Directors of State Corporations, independent state-owned companies, and General Managers of independent state-owned companies without a Board of Directors.

The Board of Directors of State Corporations and independent state-owned companies shall decide the reward amount for the General Manager or Deputy General Manager

or Deputy Manager and Chief Accountant of State Corporations or independent state-owned companies; the General Manager of an independent state-owned company without a Board of Directors shall decide the reward amount for Deputy Manager and Chief Accountant of the Company.  The General Manager of a State Corporation shall decide the reward amount for the Manager and Chief Accountant of member enterprises.

Rewards for the management board of the enterprise shall be taken from the Enterprise Reward Fund.

For State Corporations without profit due to not directly engaging in business

or engaging in business but lacking resources, the reward for the management board shall be taken from the upper-level management budget paid by member enterprises.  b) For single-member limited liability companies:

The owner representative shall decide the reward amount for the Board of Directors of the company or the Chairman of the company.

The Board of Directors or the Chairman of the company shall decide the reward amount for the Manager, Deputy Manager, and Chief Accountant of the company.

Rewards shall be taken from the Enterprise Reward Fund.  c) Enterprises classified as Category A for two consecutive years, the Chairman of the Board of Directors and the General Manager or Manager of the enterprise shall be considered for the title of "Outstanding Manager" and for an increase in salary ahead of schedule by the competent authority.

2. Enterprises classified as Category C shall not be rewarded by their management boards.

Enterprises classified as Category C for two consecutive years shall have their positions of Chairman of the Board of Directors and General Manager or Manager reviewed based on the actual situation of the enterprise by the competent authority; organizational restructuring shall be carried out according to regulations.

3. For other state enterprises

The owner shall apply the provisions of Article 15 to reward and penalize the Board of Directors and Management Board of the enterprise.

1. The Ministry of Finance shall take the lead in guiding and supervising the implementation of this Regulation together with relevant ministries and sectoral management agencies.

The Ministry of Finance shall take the lead in guiding separately on evaluation criteria and classification for enterprises in the banking, insurance, and finance sectors.

IV. IMPLEMENTATION

Article 17. Responsibility for implementation

2. Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairmen of provincial People's Committees, organizations entrusted with the role of state owners of state enterprises, Chairmen of Boards of Directors, and General Managers of state enterprises are responsible for implementing this Regulation./.

The Ministry of Finance shall take the lead in guiding separately on performance evaluation indicators and classification for enterprises in the banking, insurance, and financial sectors together with relevant ministries and agencies.

2. Ministers, heads of ministerial-level agencies, heads of government agencies, Chairpersons of provincial people's committees, municipal people's committees, organizations entrusted with the function of representing state ownership of state-owned enterprises, Chairpersons of the Board of Directors, General Directors, Directors of state-owned enterprises are responsible for implementing this Charter./.