Selling troubled subsidiaries to each other no help to reform of Vietnam state firms

The state sector cannot be reformed by having firms sell their struggling subsidiaries to others, experts said at a workshop held in Hanoi October 15 to discuss the government’s role in economic reforms.Vietnam Economic Times Newspaper quoted Tran Tien Cuong, former head of a unit that researches enterprise development at the Central Institute for Economic Management (CIEM), as saying public firms’ practice of finding new owners for their weak subsidiaries is tantamount to “spreading a disease” rather than treatment.

He blamed the sector’s poor performance on top executives’ incapability to identify key industries to operate in.

He said the government should address the underlying cause rather than transfer their subsidiaries, which he feared would simply result in “drug tolerance” in the country’s fight against state firms’ reckless investment.

A recent report on the selling of firms, by CIEM, cited oil and gas group PetroVietnam and shipping firm Vinalines as two examples of firms taking over troubled subsidiaries of others.

State shipbuilding group Vinashin, which almost went bust in 2010, transferred five projects, seven subsidiaries, and 23 second-tier subsidiaries to PetroVietnam and Vinalines.

Last year Vietnam’s sole power distributor, EVN, transferred its EVN Telecom, which reported a sharp revenue decline in 2011, to military-owned telecom group Viettel.

CIEM feared the practice could have an impact on the fair competition environment.

It also questioned the effectiveness of this strategy compared with other options like letting businesses go bankrupt.

Cuong warned that the government was adopting a non-market mechanism by allowing the transfers.

He said interference in the sector would not encourage firms to perform better but only make them overly reliant on the government.

CIEM’s Le Viet Thai said the practice of subsidiaries exchange should only be adopted in special cases, and the government should otherwise let the market decide the sales, he said.