Directive No. 36/2006/CT-TTg on the Implementation of the Government's Action Program to Accelerate the Restructuring, Reform, Development, and Enhance the Efficiency of State-Owned Enterprises for the Period 2006-2010

 DIRECTIVE

Regarding the implementation of the Government's Action Program on

accelerating restructuring, reforming, developing and

 enhancing the efficiency of state-owned enterprises during the period 2006-2010 

In recent years, the Government has issued mechanisms and policies, creating a relatively coherent and appropriate legal framework for the restructuring, shareholding, reforming, and developing of state-owned enterprises; set specific tasks and solutions for each period and directed their implementation resolutely; achieving very positive results. State-owned enterprises have been restructured at an important stage, significantly reducing small-scale loss-making enterprises, focusing more on key economic sectors essential for national defense, security, and public services; large-scale enterprises that the State needs to hold have been improved in organizational management and business operations, concentrating investment for development, enhancing competitiveness; corporate governance and state management over state-owned enterprises have been reformed to some extent, better aligning with market mechanisms.

However, compared to requirements, the progress of restructuring and shareholding of state-owned enterprises remains slow, many state-owned enterprises operate in sectors where the State does not need to control, the proportion of state capital in joint-stock companies is still high, the scale of state-owned enterprises is not large enough, management mechanisms still have many shortcomings, the operational efficiency and competitiveness of state-owned enterprises generally, including state-owned corporations, do not match the State's investment. Additionally, some regulations on the restructuring and shareholding of state-owned enterprises are not in line with practical requirements, obstacles in the implementation process are not promptly resolved.

To accelerate progress, firmly and effectively implement the task of restructuring, reforming, developing, and enhancing the efficiency of state-owned enterprises during the period 2006-2010 as per the Resolution of the 10th National Party Congress and the Government's Action Program, meeting the requirements of industrialization and modernization of the country and expanding international economic integration, the Prime Minister issues the following directive:

1. Focus on reviewing and perfecting mechanisms and policies on restructuring, reforming, developing, and enhancing the efficiency of state-owned enterprises in accordance with the spirit of the Resolution of the 10th National Party Congress and in compliance with the provisions of relevant laws recently enacted by the National Assembly. Specific assignments are as follows:

a) Ministry of Justice:

Review legal documents regulating the restructuring, shareholding, reforming, and developing of state-owned enterprises, and propose amendments and supplements to ensure consistency with the above spirit.

b) Ministry of Planning and Investment, in coordination with relevant agencies:

- By December 31, 2006:

+ Submit to the Government for amending and supplementing Decree No. 153/2004/NĐ-CP on the organization and management of state-owned holding companies and the conversion of state-owned companies into parent-subsidiary models, ensuring the parent company is a multi-shareholder entity; promoting and leveraging the strength of the entire group while ensuring the autonomy of member enterprises as independent legal entities;

+ Propose amendments to the Law on State-Owned Enterprises 2003 regarding profit distribution mechanisms;

+ Submit to the Prime Minister for issuance of a Decision replacing Decision No. 155/2004/QĐ-TTg of the Prime Minister on criteria and classification lists of state-owned companies and independent subsidiaries of state-owned holding companies, aiming to minimize sectors and areas where the State retains 100% equity and controlling shares.

- By March 31, 2007:

+ Submit to the Government for amending and supplementing Decree No. 80/2005/NĐ-CP dated June 20, 2005 of the Government on the transfer, sale, lease, and assignment of state-owned companies, eliminating the leasing mechanism for state-owned companies; implementing sales through auction; not transferring or selling state-owned companies with land advantages;

+ Amend the procedures and formalities for dissolving state-owned enterprises towards simplifying administrative procedures and enhancing the seriousness in the implementation of decisions by relevant agencies; setting a reasonable time frame for resolving policies for employees in dissolved enterprises.

c) Ministry of Finance, in coordination with relevant agencies:

- By November 30, 2006, submit to the Government for issuance of a Decree replacing Decree No. 187/2004/NĐ-CP of the Government on converting state-owned companies into joint-stock companies, paying attention to broadening the scope of shareholding, including certain economic groups, state-owned holding companies, and public service enterprises; determining enterprise value according to market principles, including pilot inclusion of land value in enterprise valuation; guiding the calculation of enterprise brand value; providing preferential policies for enterprises; linking the shareholding of state-owned companies with listing on stock exchanges.

- By January 31, 2007, submit to the Government:

+ Draft of a Decree on the financial mechanism of a limited liability company with a single shareholder being the State.

- In the first quarter of 2007, submit to the Government:

+ Amend and supplement Decree No. 199/2004/NĐ-CP of the Government on the Financial Management Regulations of state-owned companies and the management of state capital invested in other enterprises; guide the appointment of managers of state capital in other enterprises and mechanisms to enhance the responsibility of those directly managing state capital investments in other enterprises; strengthen the role of inspection and supervision by shareholders, exercising rights through representatives without direct intervention in the operations of joint-stock companies and limited liability companies; regulations on the relationship between the State Capital Investment Corporation and Ministries and sectors in managing state capital in transferred enterprises;

+ Supervision mechanisms and regulatory policies for enterprises that have not yet eliminated their monopoly positions.

+ Provisions on supervision of enterprises operating at a loss and without efficiency.

d) The Ministry of Labor - Invalids and Social Affairs shall take the lead and coordinate with relevant agencies before December 31, 2006:

- Submit to the Government:

+ A Decree on policies for redundant labor due to restructuring state-owned enterprises in accordance with actual conditions and new requirements, aiming to utilize the maximum number of current employees starting from 2007;

+ A Decree on salary management mechanisms and income in limited liability companies wholly owned by the State.

- Submit to the Prime Minister regarding the classification of salaries for managers in economic groups.

đ) The Ministry of Commerce shall take the lead and coordinate with relevant agencies, before January 31, 2007, submit to the Government a list of sectors under State monopoly and the roadmap for eliminating monopoly in certain sectors.

2. Ministries, ministerial-level agencies, government-affiliated agencies, provincial People's Committees, centrally governed city People's Committees, economic groups, and state-owned holding companies shall implement the following tasks effectively:

a) Fully understand the Party's Resolutions on restructuring and modernizing state-owned enterprises, and based on that, develop specific action programs to implement the restructuring and modernization of state-owned enterprises within their jurisdiction.

b) Before February 28, 2007, coordinate with the Steering Committee for Enterprise Modernization and Development to complete the drafting and submission to the Prime Minister of plans and roadmaps for restructuring, shareholding, and privatization of independent state-owned companies, member enterprises of economic groups and state-owned holding companies, and shareholding and privatization of economic groups and state-owned holding companies within their jurisdiction according to the following principles:

Consider the restructuring, shareholding, and modernization of economic groups and state-owned holding companies as a breakthrough in restructuring, modernizing, developing, and enhancing the effectiveness of state-owned enterprises in the coming period. Economic groups and state-owned holding companies that operate effectively and are entrusted with managing, exploiting, and distributing important national resources as tools for the State to macro-regulate the economy should, in the short term, have the State retain 100% of the registered capital and perfect their organizational models and operational mechanisms to meet the role of being tools for the State to macro-regulate the market economy.

Sharehold state-owned companies and limited liability companies wholly owned by the State engaged in business operations and enterprises operating in certain public welfare sectors, including those combining economic activities with defense and security, only when absolutely necessary should the State hold controlling shares.

Do not sharehold enterprises that no longer have state capital but instead sell the enterprise or resolve employee benefits and policies, and the State recovers land managed by the enterprise to organize public auctions for land use rights. Combine enterprise restructuring by industry and region through mergers, consolidations, or reorganization into parent company-subcompany models for enterprises in the same industry with technological and market relationships, where the parent company and subsidiaries are multi-owned companies.

c) Accelerate the progress of restructuring and modernizing state-owned enterprises according to approved projects. Coordinate with relevant agencies to promptly address difficulties during implementation, especially in determining enterprise value, handling financial issues, and surplus labor.

d) Accelerate the progress of restructuring, modernizing, and developing state-owned forestry and agricultural farms according to approved projects. In the fourth quarter of 2006, complete the approval of projects for classifying and restructuring state-owned forestry and agricultural farms. In 2007, complete the review of current land use status and classification of land, with specific solutions to convert to non-revenue land allocation or land leasing for areas retained by state-owned forestry and agricultural farms for production and business operations as stipulated in Decree No. 170/2004/NĐ-CP dated September 22, 2004 of the Government on restructuring, modernizing, and developing state-owned agricultural farms and Decree No. 200/2004/NĐ-CP dated December 3, 2004 of the Government on restructuring, modernizing, and developing state-owned forestry farms and laws on land; ensure effective land use. Expand pilot shareholding of orchards linked to processing facilities for preliminary evaluation in 2007.

đ) Direct managers of state-owned capital in joint-stock companies with state capital to list enterprises meeting conditions on the stock market, linking share issuance with public listing on the market.

e) Continue to reform organizational management so that state-owned companies can operate effectively in a competitive environment, enhance transparency. Develop training plans for capable business management cadres to manage and operate enterprises efficiently. Reorganize the Board of Directors to truly represent direct ownership at holding companies and state-owned companies, accountable to owners for all activities of the holding company. Direct holding companies and state-owned companies that have transitioned to the parent company-subcompany model to draft Articles of Organization and Operation for approval in accordance with legal regulations.

g) Ministries: Industry, Agriculture and Rural Development, Construction, Transport, People's Committee of Hanoi City, and Ho Chi Minh City shall select and direct the implementation of pilot models where the Board of Directors signs contracts with General Managers for some state-owned holding companies.

h) Strictly implement the transfer of state-owned capital in shareholding enterprises and limited liability companies wholly owned by the State (excluding enterprises operating public welfare services as decided by the Prime Minister) to the State Capital Investment Corporation for management and investment.

3. Accelerate the shareholding of commercial banks and insurance companies:

a) The State Bank of Vietnam:

- Direct the implementation of the content and timeline for the shareholding reform of the Vietnam Bank for Foreign Trade and the Mekong Delta Development Commercial Joint Stock Bank according to the project approved by the Prime Minister.

- Direct the Investment and Development Bank, the Vietnam Industry and Trade Bank, and the Agriculture and Rural Development Bank to develop shareholding reform projects to be submitted to the Prime Minister for approval in the first quarter of 2007.

b) The Ministry of Finance shall direct the shareholding reform of the Vietnam Insurance Corporation and the formation of the Vietnam Financial Insurance Group in accordance with the Prime Minister's approval.

4. The Ministry of Finance:

a) Guide the establishment of financial management regulations for economic groups decided to be established and approved by the Prime Minister, including the organizational and operational charter; the implementation of financial mechanisms and the preparation of consolidated financial reports for economic groups, state-owned corporations that have transitioned to operate under the parent company-subcompany model.

b) Urgently complete the operational mechanism, enhance management and operational capacity of the State Capital Investment Corporation to achieve effective state capital management and investment goals.

c) In 2006, continue to approve and allocate funds to address policies for surplus labor as stipulated in Decree No. 41/2002/NĐ-CP dated April 11, 2002 of the Government on policies for surplus labor due to restructuring of state-owned enterprises and Decree No. 155/2004/NĐ-CP dated August 10, 2004 of the Government amending and supplementing certain articles of Decree No. 41/2002/NĐ-CP (including those enterprises that have completed restructuring in 2005 but have not yet been resolved according to regulations) following the approved timeline for restructuring state-owned enterprises by the Prime Minister.

5. Ministries and agencies prepare mid-term reviews and final summaries of the following contents:

a) The Ministry of Planning and Investment prepares (in 2007): a mid-term review of the conversion and management organization of joint stock companies under the parent company-subcompany model; a mid-term review of the conversion and operation of state-owned companies in the form of limited liability companies with one member.

b) The Ministry of Finance prepares: a report on the mid-term review of the conversion of state-owned companies into joint stock companies according to Decree No. 187/2004/NĐ-CP (end of 2006); a mid-term review of the shareholding reform of state-owned joint stock companies and parent companies (end of 2007).

c) The Steering Committee for Enterprise Reform and Development prepares: a report on the pilot shareholding reform of public service units with revenue (beginning of 2007); a mid-term review of the organizational model and effectiveness of economic groups (2008); a mid-term review of the board of directors' contract for hiring executive managers (2008); a mid-term review of the transfer of public service units under economic groups and state-owned joint stock companies to scientific and technological enterprises (2008).

d) The Ministry of Agriculture and Rural Development prepares: a mid-term review of the implementation of Decree No. 170/2004/NĐ-CP dated September 22, 2004 of the Government on the restructuring, modernization, and development of state-owned agricultural farms and Decree No. 200/2004/NĐ-CP dated December 3, 2004 of the Government on the restructuring, modernization, and development of state-owned forestry farms (2007); a mid-term review of the pilot shareholding reform of orchards linked with processing facilities (2007).

The Steering Committee for Enterprise Reform and Development is responsible for urging, monitoring, and regularly reporting to the Prime Minister on the implementation of this Directive./.