89810 Vietnam Economic Management and Competitiveness Credit EMCC Policy Note Transparency of State Owned Enterprises in Vietnam Current Status and Ideas for Reform THE WORLD BANK IBRD-IDA WORLD BANK GROUP Transparency of State Owned Enterprises in Vietnam Current Status and Ideas for Reform THE WORLD BANK IBRD-IDA WORLD BANK GROUP T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Foreword This Policy Note provides an overview of Governance Specialist, World Bank); Huong Thi information disclosure requirements and Lan Tran (Governance Specialist, World Bank); practices of State Owned Enterprises (SOEs) in Migara de Silva (Senior Economist, World Bank), Vietnam. It was prepared as part of Analytical and Jhungsoo Park (Consultant, World Bank). and Advisory work under the Vietnam Economic Programmatic support was provided by Linh Management and Competitiveness Credit Anh Thi Vu (Program Assistant, World Bank). to help inform the Government of Vietnam’s efforts to strengthen the disclosure of financial The Policy Note has been discussed at various and non-financial information by SOEs. seminars and workshops in Vietnam with representatives from the National Assembly, This policy note was prepared by Gregory the Government of Vietnam, State Owned Smith (Economist, World Bank), Le Duy Binh Enterprises, and Development Partners. The (Consultant, World Bank) and Jim Colvin team is grateful to the Corporate Finance (Consultant, World Bank) under the overall Department of the Ministry of Finance, the guidance of Victoria Kwakwa (World Bank Enterprises Development Agency of the Ministry Country Director for Vietnam), Sudhir Shetty of Planning and Investment, and the Asian (World Bank Sector Director for PREM East Asia Development Bank in Vietnam for valuable and Pacific), Deepak Mishra (Lead Economist guidance and advice. Support for the preparation PREM, East Asia and Pacific), and Sandeep of this Policy Note is gratefully acknowledged Mahajan (Lead Economist for the World Bank from the following EMCC Development in Vietnam). Inputs were provided by Sameer Partners: the Australian Department of Foreign Goyal (World Bank Sector Leader for Finance Affairs and Trade (DFAT), the United Kingdom and Private Sector Development); Sunita Kikeri Department for International Development, the (World Bank Lead Private Sector Development Swiss State Secretariat for Economic Affairs, and Specialist); Habib Rab (Senior Economist, World the Canadian Department for Foreign Affairs, Bank); Quang Hong Doan (Senior Economist, Trade and Development. All errors remain the World Bank); James Anderson (Senior authors’. 3 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Contents Key Points and Ideas for Next Steps.................................................................................................9 1. Introduction.............................................................................................................12 2. What are the benefits associated with SOE information disclosure?..................16 3. What disclosure obligations do Vietnamese SOEs currently have?....................20 4. What information is currently disclosed in Vietnam?..........................................24 5. International Practice with SOE disclosure...........................................................34 6. What steps could be taken?....................................................................................38 References.......................................................................................................................................... 41 Annex I: Review of Current Legislation Impacting on SOE Information Disclosure............. 43 Annex II: Website Information Status Checks for SOEs: April 2013.......................................... 58 Annex III: South Korea’s Experience with SOE Information Disclosure................................... 64 5 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Abbreviations and Acronyms CIEM Central Institute for Economic Management EGs Economic Groups GCs General Corporations GSO General Statistics Office IPO Initial Public Offering JSB Joint Stock Bank MARD Ministry of Agriculture and Rural Development MOF Ministry of Finance MOIT Ministry of Industry and Trade MOLISA Ministry of Labor, Invalids and Social Affairs MOT Ministry of Transport MPI Ministry of Planning and Investment PFM Public Finance Management PPC Provincial People Committee PREM Poverty Reduction and Economic Management SAV State Audit of Vietnam SBV State Bank of Vietnam SCIC State Capital Investment Corporation SEDP Socio-Economic Development Plan SEC Securities and Exchange Commission SEG State Economic Group SGC State General Corporations SOCB State-Owned Commercial Bank WB The World Bank 7 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Key Points and Ideas for Next Steps There is a growing body of evidence that information disclosure by SOEs, alongside other reforms, can contribute to improved efficiency. Information disclosure includes both financial and non-financial data and can be either internal or external (i.e. public disclosure). The prevailing view is that the disclosure of both financial and non-financial See page 12 information, relating to SOEs, has been generally disappointing in Vietnam. Current practices vary across SOEs but are generally insufficient in the quality, accuracy and timeliness of data, such that the capacity of government to effectively oversee SOE performance is severely constrained. The existing stock of regulation also falls short of providing for an effective legislative framework especially for the public disclosure of information. The findings from the research support this prevailing view and suggest See page 24 that whilst there are a considerable number of SOEs producing information for internal purposes, the quality of information needs to be improved. Specifically, information needs to become more accurate and more often include key information for oversight and monitoring and evaluation. The standard of public disclosure is below levels in comparable jurisdictions. Public information is at worst non-existent and at best outdated, ambiguous and contradictory (with the exception of a few large equitized SOEs). Better public disclosure –in terms of volume and quality- could bring substantial benefits, as discussed in Section 2. It is also apparent that being in the spotlight can increase the demand for information as many of the troubled SOEs have additional requirements. Reform in Vietnam needs to be specific to the country’s legal, institutional and See page 34 economic context. Nevertheless, there are key lessons on SOE reform, both general and focused on information disclosure, which Vietnam can garner from specific countries and OECD guidelines. (Some key lessons are summarized in Section 5.) 9 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Ideas to take things forward: The following are for credible steps that could be taken to improve SOE information disclosure as a means of improving SOE efficiency. The proposed steps are listed (each one is explored in further detail in Section 6): I. Phase in the enhanced disclosure process by piloting it with a select set See page 38 of SOEs. One such phasing could start with the Economic Groups, then expand to General Corporations and finally to the remaining SOEs with 100 percent state equity. II. Focus on public disclosure and not merely on internal disclosure. III. Disclose quality information on the SOEs at one central place (website), with a national agency being in charge of coordinating the process. IV. Simplify information requirements and build a more straight forward legislative framework and a standardized information disclosure system. V. Incentivize compliance by SOEs to the legislative and regulatory framework by rewarding compliant enterprises and penalizing non-complaint ones. 10 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 1. Introduction 1.1. Information disclosure by State Income Vietnam’, improving transparency Owned Enterprises (SOEs) is part of a was cited by respondents as the top reform broader agenda to promote greater public solution for SOEs in Vietnam together with sector transparency in Vietnam. Recent accelerating equitization (Figure 1)2. Prime studies by the World Bank and others have Minister’s Decision 929 (2012), which sets shown that despite progress, compliance out an overall plan to restructure General with legal requirements for transparency Corporations and State Economic Groups, remains a challenge across a wide range of sets out several commitments to help public sector governance areas in Vietnam.1 improve the transparency of SOEs. However, the marginal benefit to increased transparency is very significant. Timely 1.3. The SOE transparency agenda is an availability of credible economic data, and important part of the program supported better communication of policy changes, under the Economic Management and can help reduce market uncertainty and Competitiveness Credit (EMCC) budget perceptions of risk. support operation.3 It is with this background that this Policy Note was prepared to 1.2. Transparency of SOEs is particularly help promote a dialogue between the important given their large presence in Government of Vietnam and Development Vietnam’s economy. In a survey conducted Partners on ways to enhance disclosure of in 2011 for the Vietnam Development Report information by SOEs. (2012) entitled ‘Market Economy for a Middle 1 See for example: ‘Vietnam Development Report (2010): Modern Institutions’; ‘Vietnam Development Report (2012): Market Economy for a Middle Income Vietnam’; ‘Survey Report on Information Disclosure of Land Management Regulations (2010)’; ‘Vietnam Fiscal Transparency Review (2013)’. In addition to these, World Bank is starting a Vietnam Transparency Project to help improve transparency in different areas of public sector governance. 2 World Bank, Vietnam Chamber of Commerce and Industry, Irish Aid (2012), ‘Vietnam in Transition – Changing Attitudes Toward the Market and the State’. 3 See: http://www.worldbank.org/projects/P122793/economic-management-competitiveness-credit-1?lang=en; accessed July 07, 2013. 12 Introduction Figure 1: SOE Reform Solutions for Vietnam Improving Transparency 50 38 4 4 4 More independent audits 44 42 7 5 2 Accelerating equitization 41 47 4 5 2 Highly effective Moderately Strengthening regulations 36 47 6 5 6 effective No effect Reducing Financial Support from the Gov. 17 48 5 17 11 Moderately ineffective Ending privileged access to bank credit 19 35 6 27 7 Highly ineffective No government guarantees 16 39 6 20 15 Don’t know 0 10 20 30 40 50 60 70 80 90 100 Source: ‘Vietnam in Transition – Changing Attitudes Toward the Market and the State’. 13 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 2. What are the benefits associated with SOE information disclosure? 2.1. Timely and accurate disclosure of 2.3. Better disclosure is focused on internal corporate information is necessary for and external stakeholders, and requires accountability, performance monitoring, and disclosure of accurate financial and non- ensuring compliance with corporate rules financial data. Internal disclosure can be and regulations. These can contribute to considered as ‘within government’, including better functioning of markets and improved for example: budget reporting, financial corporate performance. Lack of corporate statements, audit reports, performance information disclosure on the other hand can reporting and other monitoring and lead to opaque practices and, as illustrated evaluation requirements by government by the current (and previous) global crisis, “owners” and regulators. External disclosure have negative economy-wide impacts. refers to information that is in the public domain (e.g. via websites, annual reports, 2.2. Improving information disclosure publications, press conferences, mass by SOEs is a high priority in Vietnam media, web portals, and official gazettes). given the relatively large role they play Disclosure can also be direct from the SOE or in the economy. Improved disclosure of via third parties (for example by the Ministry information would provide investors an of Finance or State Audit of Vietnam). idea of SOE performance, give the public the right to information on the use of 2.4. There is a large body of evidence public assets, and give government the from the private sector highlighting the ability to hold SOEs accountable for results. transformational role that information Therefore, information disclosure needs to disclosure can have on performance, be improved not only for its own sake, but including better financial performance because it can play a key part in unlocking and improved market valuations. For overall SOE efficiency that should lead to a instance, a recent study of the eight largest more favorable business environment and Latin American stock markets showed improved use of public funds and scarce that increases in voluntary internet-based resources such as land and capital. disclosure lead to both improved market valuations and returns on assets4. Where 4 Garay, Urbi, Gonzalez, Maximiliano, Guzman, Alexander and Trujillo (2012) “Internet-Based Corporate Disclosure and Market Value: Evidence from Latin America”. 16 W h at a r e t h e b e n e f i t s a s s o c i at e d w i t h SOE i n f o r m at i o n d i s c lo s u r e ? ownership is separated from control, the In Lithuania, an improved disclosure information known to managers inside an regime formed a key component of an enterprise is considerably greater than the SOE reform program commenced in information known to outside shareholders. 2009. The results were immediate and This leads to agency costs, and increases impressive. In 2009, the portfolio of SOEs in perceived risk. Improved disclosure can made an operating loss of 276M Litas reduce these costs and risks, increasing (USD 105 mn), in 2010 it made a profit of valuation. 40 mn Litas (USD 15 mn) and by 2011 the profit had climbed to 142M Litas (USD 54 2.5. For SOEs the benefits are potentially mn). Dividends have climbed almost five even greater since the information gaps fold.6 between managers and owners are potentially bigger. Evidence of these benefits 2.6. In Vietnam, there is strong demand for is harder to collect, since improvements in improved transparency and accountability. disclosure are often accompanied by other In January 2013, when chairing a meeting governance changes (board improvements, with SOE leaders, Prime Minister Nguyen institutional reforms, financial restructuring Tan Dung requested that: “State-owned for example). However, there are good recent enterprises must increase the transparency case examples of where improved disclosure of their operations” and “that business and of information, alongside other reforms, has production results must be published in a led to the improved performance of SOEs: transparent, honest and timely manner so the public understand how SOEs operate”7. In Malaysia, the Government introduced There is a drive for SOEs to provide more and a comprehensive reform of Government better quality information to government Linked Companies in 2004, based on including on: business strategies; financial a foundation of improved disclosure reports; investment portfolios and progress and performance monitoring. Since of investment projects. Information is also the program commenced, combined demanded on the qualifications and the SOE net income (profit) has grown at a expertise of managers plus criteria for compound rate of over 18 percent; and appointment to leadership positions. the portfolio returns over 11 percent per annum on equity.5 5 For further information see: http://www.pcg.gov.my/PDF/GLCT%20Programme%20Report%20Card%20%28May%202012%29.pdf 6 For further information see: http://vkc.vtf.lt/index.php?r=document/view&id=1851. 7 See: http://en.vietnamplus.vn/Home/PM-urges-transparent-SOE-operations/20131/31181.vnplus; accessed 24 April 2013. 17 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 2.7. Supporting the justification for mismanagement was publicly disclosed improved disclosure practices are until the Economic Group collapsed. The shortcomings with the status quo in Vietnam. inspections and audits focused on only one For example it is widely acknowledged small portion of the company, suggesting that had transparency and information failures in the control process and in the disclosure been better, the recent problems governance of SOEs in general. Had audits with Vinashin could have been less severe and inspection reports been disclosed to as the relevant authorities would have acted the public these shortcomings in the audit earlier. Vinashin was inspected and audited and inspection processes might have been 11 times within two years prior to its failure. identified earlier and encouraged further However, none of the wrongdoing and scrutiny of the company8. 8 See: http://sggp.org.vn/kinhte/2010/9/238030/; accessed 24 April 2013. 18 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 3. What disclosure obligations do Vietnamese SOEs currently have? 3.1. As background to this note, research responsible for providing oversight on was undertaken to review and document different, this weakens responsibility for the the existing disclosure requirements for overall performance of SOEs. SOEs in Vietnam. This stocktaking exercise is set out in Annex I. It shows that reporting 3.2. For example, a key piece of guidance is requirements have grown organically and Decree 99/2012 from which SOEs are obliged involve disclosure of different types of to provide the following information to the information to many different agencies. PM and different line ministries (see Table 1 Therefore, although there are many parties below). Table 1: Vietnamese SOEs current reporting requirements To the Prime Minister • Any changes and revisions to the Charter; • Any changes and revisions to the objective, mission, business line, corporate restructuring, dissolution or request for bankruptcy. • Increase or decrease in share capital, capital mobilization, shares and total shared to be offered to the public, the repurchase of more than 10% of shared which have been sold. • Five year strategy, business plan. To Line Management Ministries and / or Provincial People’s Committee (PPC) • Performance of the Representative, payment of salary, fringe benefits of the representative, evaluation of the representative. • Report on performance of the board of directors, key management positions (director general and deputies). • Any changes and revisions to the objective, mission, business line, corporate restructuring, dissolution or request for bankruptcy. • Any changes and revisions to the objective, mission, business line, corporate restructuring, dissolution or request for bankruptcy. • Increase or decrease in share capital, capital mobilization, shares and total shared to be offered to the public, the repurchase of more than 10% of shared which have been sold. • Five year strategy, business plan. 20 W h at d i s c lo s u r e o b l i g at i o n s d o V i e t n a m e s e SOE s c u r r e n t ly h av e ? Table 1: Vietnamese SOEs current reporting requirements • List of investment project of group A, B; • Plan to procure assets or to borrow loans of 50% or more or of a lower percentage as stipulated in the conglomerate’s charter. • Plan to borrow from overseas. • Salary of the members of the boards, director generals and deputy director generals, total budget for salary of the board of directors. • Financial reports, profit appropriation plans. • Reports on law compliance, the management and maintenance of state capital, implementation of business plan, business strategy, business performance, business efficiency. To the Ministry of Finance (MoF) • Information on business results, performance and the implementation and delivery of social and public services. • Information on the plan to increase or decrease of State capital at equitized conglomerates. • Increase or decrease in share capital, capital mobilization, shares and total shared to be offered to the public, the repurchase of more than 10% of shared which have been sold. • Any plan for borrowing from overseas. To the Ministry of Planning and Investment (MPI) • Plans on reestablishment, restructuring, revisions to objective, missions, change in ownership, dissolution, request for bankruptcy in the case of conglomerates. • Five year business plan and strategy as in the case of State conglomerates • Annual reports on the implementation of objectives, task, business of conglomerate and general cooperation. To the Ministry of Home Affairs (MoHA) • Report by State representative at the SOEs on the compliance of regulations by the Party and by the Government in terms of personnel. To MOLISA • Report on the compliance of policies and regulations on recruitment, salary, bonus and fringe benefit of the SOE. Source: Decree No. 99/2012/ND-CP dated November 15, 2012 on the Implementation of the Rights, Responsibilities and Obligations of State Owner for SOEs and State Capital Invested in enterprises and interviews with different ministries. 21 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 3.3. In this context, the main findings from SOEs and, in imposing new regulations, policy the review are as follows: makers should seek to weigh up these costs against the potential benefits. An effective There is little obligation on SOEs use of Regulatory Impact Assessments, as to publicly disclose information on already conducted by the government vis- financial and non-financial performance. à-vis new regulations, would be one process Disclosure requirements are mostly by which to assess the net benefits of any internal and public disclosure is primarily new disclosure requirements for SOEs. voluntary. SOEs are obliged to send reports and 3.5. The legislative review was information to many different places as complemented by interviews with key opposed to a few or one single agency. stakeholders (including at MPI, MoF, CIEM Each agency mandated to govern SOEs and SOE employees where possible). From has different rights to information and these interviews, it is clear that in addition many of them are overlapping. to legal requirements for reporting, SOEs are The instruction is fragmented and to in practice often subject to ad hoc requests follow them requires knowledge of for information by the National Assembly more than ten pieces of legislation. (typically for larger SOEs), the police, line ministries and sub-national government. Equitized and listed SOEs have additional disclosure requirements (for example in 3.6. In summary the existing stock of the Securities Law) regulations falls short of providing an effective If an SOE did attempt to comply with legislative framework for information the legislative framework in its totality disclosure. There is insufficient provision for then it would be a major administrative public disclosure of information, which is burden. largely voluntary. Furthermore, the complex and overlapping nature of the requirements 3.4. This suggests that any further reviews dilutes accountability, places a substantial to SOE disclosure requirements should seek administrative burden on SOE compliance to rationalize and consolidate the existing obligations, and decreases the capacity of regime. In addition, it is important to take SOEs to realistically or comprehensively account of the fact that placing reporting meet their internal and external reporting obligations on SOEs imposes costs on the requirements. 22 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 4. What information is currently disclosed in Vietnam? 4.1. The prevailing view is that the disclosure part of this research 89 had websites (see of both financial and non-financial information Annex II for the full list). Some of the SOEs relating to SOEs in Vietnam is disappointing. use the websites as a marketing tool and Information on SOEs was ranked as the top others to offer online services. However, area for improving disclosure in a survey rarely are the websites used as a means to conducted in April 2012 on the transparency systematically disclose financial and non- of the State Budget in Vietnam9. The financial information. methodology was inspired by colleagues work on the public disclosure of land management 4.3. That said, as noted above and can be regulations in Vietnam10. This section seeks seen in Annex I, the legislative framework to assess whether there is accuracy in this provides few clear rules about what should viewpoint by triangulating information from be in the public domain let alone specifically different sources. Three types of information on websites. The sample is biased towards were researched: (i) primary data and larger SOEs as an attempt was made to analysis (including website searches); (ii) include all Economic Groups (EG), General existing research literature; and (iii) anecdotal Corporations (GC) and SOEs listed as part information from interviews, workshops and of Prime Minister’s Decision No. 91/TTg and meetings (with SOE officials, government, Prime Minister’s Decision No. 90/TTg. All of civil society and development partners). A the 11 EGs and 12 GCs had websites. Table summary of findings is provided here but 2 below shows that while each of the GC further information from the information and EG websites provide basic non-financial status checks can be found in Annex II. information, very little financial information is provided (either in a summarized format Primary data and analysis or as an annual or auditors report). The disclosure performance of GC and EGs does 4.2. Many SOEs have a functioning website, not differ substantially from other large SOEs although a substantial minority does not. Of with the exception that EGs are more likely to 100 SOEs sampled (including 11 Economic provide an annual report, auditors report or Groups and 12 General Corporations) as financial statement. 9 WB, “Vietnam Fiscal Transparency Review: Analysis and Stakeholder Feedback on State Budget Information in the Public Domain,” (March 2013) – See p.30-31 and 39-40 10 See: http://bit.ly/1qjS8nr 24 W h at i n f o r m at i o n i s c u r r e n t ly d i s c lo s e d i n V i e t n a m ? Table 2: Vietnamese SOEs current reporting status Annual report or Number Basic News/ Financial Summarised with Information Strategy Statement Financial Website on SOE Overview or Auditors Information report SOE sample 89 100% 87% 16% 8% Of which Economic Groups 11 100% 100% 45% 9% Of which General Corporations 12 100% 50% 8% 8% Table 3: General Corporation Website Check General Corporations Company Company Info. on Annual Major Overview News/ Financial report/ Decisions/ Strategy Perfomerce Financial Resolution by Statement/ Board/ Auditors Management report Housing and Urban Development Corporation Song Da Corporation Vietnam Northern Food Corporation Vietnam Southern Food Corporation Vietnam Paper Corporation Vietnam National Coffee Corporation Vietnam Airlines Corporation Vietnam National Tobacco Corporation Vietnam National Shipping Lines Vietnam Railways Vietnam Steel Corporation Vietnam Cement Industry Corporation 25 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Table 4: Economic Group Website Check Economic Groups Company Company Info. on Annual Major Overview News/ Financial report/ Decisions/ Strategy Perfomerce Financial Resolution by Statement/ Board/ Auditors Management report Vietnam Posts and Telecommunications Group (VNPT) Vietnam National Coal – Mineral Industries Holding Corporation Limited (VINACOMIN) Vietnam Oil and Gas Group Vietnam Electricity The Vietnam National Textile and Garment Group Vietnam Rubber Group BaoViet Holdings (BVH) Viettel Group Vietnam National Chemical Group Vinashin Business Group Vietnam National Petroleum Group 4.4. The information specific to each SOE the following disclosure of information by is provided in Annex II and Tables 3 and 4 supervisory bodies: illustrate whether a website is present and the associated content for 11 EGs and 12 GCs. 4.6. State Audit Vietnam (SAV): SOEs are subject to audit by the SAV by law. The law Indirect Sources stipulates in Article 59 that “audit reports, after being issued, shall be publicized together 4.5. In addition to the direct disclosure with financial statements according to the by SOEs there are potential sources of provisions of the State Budget Law and the indirect information. The research revealed Accounting Law”. Despite this legislation it 26 W h at i n f o r m at i o n i s c u r r e n t ly d i s c lo s e d i n V i e t n a m ? remains difficult for members of the general 4.9. National Steering Committee on public to find SOE audit reports. Whilst SAV Enterprise Reform and Development has reportedly stepped up efforts to audit (NSCERD): SOE information is often disclosed SOEs financial statements, less than ten in reports made public by NSCERD. The SOE related auditor’s reports (out of a total reports are mostly based on communication around 1,300 SOEs) can be found on SAV’s from the MoF to the rest of government. website, and some of these reports date Whilst the reports are not available online back to 2007. they have recently been shared with the mass media. The reports however only 4.7. State Inspectorate: A number of provide aggregate information on SOEs that SOEs are also subject to inspection by is not broken down by SOE. the State Inspectorate of the Provincial People’s Committee (PPC). The Inspection 4.10. Ministry of Finance (MoF): With PM Law (Article 21) stipulates that conclusions Decision 224/2006/QD-TTG (October 6, 2006) of all inspections should be notified to the and Circular 115/2007/TT-BTC (September public. Such publication can take place by: 25, 2007) on supervision and assessment announcement; press conference; publication of SOE performance, the government in the mass media; posting on websites of has stepped up its efforts to monitor the state inspection agencies or via a public notice. performance of SOE through independent This should provide public information on the review and stricter enforcement of financial inspected SOEs. The record on publication reporting to the Ministry of Finance11. In however is not very strong. The recent November 2012, the Ministry of Finance publication of inspection reports on Vinashin submitted a report to the National Assembly (post collapse) and Vinalines among other on the overall situation of SOEs and their economic groups are promising though these performance. The report was then leaked continue to lack in detail. to the public through the mass media and it was the first time that the pubic was really 4.8. Line Ministries: There is no regulation informed about the huge amount of debts on the obligation of line ministries to and the poor performance of SOEs in a semi- disclose information on SOEs. The annual official manner. The MoF website does not reports of selected ministries reviewed as provide detailed information on SOEs as part of this study (e.g. MOIT, MOLISA, MARD, required by prevailing regulations, e.g. on the etc.) did not provide information regarding rankings of SOEs. Very limited information the performance of the SOEs under those on SOEs could be found on the ministry’s ministries. 11 In addition to this, the Prime Minister also issued Decision No. 169/2007/QD-TTg, providing regulation on supervision over loss-making and poor-performing SOEs. 27 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m website, e.g. the total contribution of SOE SOEs and can be used for macro or sector to the State Budget. The ministry is stepping analysis, there is no information on specific up its efforts to disclose more information SOEs, which limits utility in terms of public on financial performance of SOEs on its interest in performance of individual SOEs. website by drafting and enforcing a decree on performance monitoring of SOEs. 4.13. State Bank Vietnam (SBV): The SBV has recently stepped up its efforts to use its 4.11. Ministry of Planning and Investment website to communicate monetary policy (MPI): MPI does not seem to play a very and major decisions relating to the banking active role in disclosing information on SOEs sector. It shares through its website laws and through its website. Only a very limited regulations related to the banking sector. The amount of SOE-related information and data SBV also provides key data and information is available on the ministry’s website. The on the monetary market and the banking information on the ministry’s website is more sector, foreign exchange market, banking focused on socio-economic development, supervision and oversight. However, the territorial economic development and website lacks information on State Owned planning, FDI, ODA management, public Commercial Banks and information on links procurement. The ministry also runs a between SOEs and the banking sector e.g. Business Portal at www.business.gov.vn, total lending to SOEs. and the portal mostly provides key facts on private sector enterprises. Information on Existing Research Literature single SOEs cannot be found on this website. 4.14. A key piece of research on reporting MPI is planning to upgrade its business by 290 SOEs was carried out by CIEM in portal to disclose more information on SOEs. 201013. Insights from the CIEM study include: At the time of writing, some general reports (with limited information) on SOEs had been Nearly all (99 percent) of the SOEs posted on this portal. surveyed did provide some kind of information through websites, reports 4.12. General Statistics Office (GSO): The to owner line ministries and agencies, annual Statistics Yearbooks published by corporate publications and mass the GSO provide information on SOEs (albeit media. Most common was the internal with a two-year delay), collected by the disclosure of information in the form office’s annual enterprise surveys12. Whilst of reports submitted to the owner line the information is useful for an overview of 12 See ww.gso.gov.vn; accessed 24 April 2013. 13 The study covered the following places: Hanoi, Hai Phong, Quang Ninh, Nghe An, Ha Tinh, Da Nang, Dak Lak, Dak Nong, Ba Ria Vung Tau, Dong Nai and Ho Chi Minh City. SOEs included in the survey: holding company, independent SOE, SOEs which are part of an SEG, General Economic Corporation. 28 W h at i n f o r m at i o n i s c u r r e n t ly d i s c lo s e d i n V i e t n a m ? ministries/agencies and to the board of members of the management, and by directors (95 percent of SOEs). Around the chairman of the board. 70 percent produced reports with profit and loss statements and balance sheets. 4.15. Another relevant study by Binh These reports however were typically (2012) looks into the voluntary provision unavailable to the general public – only of information by Vietnamese enterprises 7 percent of SOEs had widely circulated in 2009 as part of their annual reports. The publications and only 9 percent utilized sample covers 297 non-financial listed mass media. enterprises, including SOEs that have been equitized. Of the enterprises surveyed 98 The study finds that equitized SOEs (or 33 percent) did not disclose an annual perform better than SOEs generally report and of the majority that did the in relation to information disclosure. quality varied considerably. While listed Among the equitized SOEs that were firms’ disclosure performance in Vietnam is surveyed, 16 percent produced widely better than non-listed SOEs, this research circulated publications (compared with suggests that equitization is only part of the 7 percent of SOEs surveyed) and 32 answer: even when firms are listed they may percent utilized mass media (compared still not disclose information, even though to 9 percent of SOEs surveyed). this is a legal requirement, and that disclosed CIEM also found the following: (i) 53 information when available often lacks percent of SOEs do not disclose internal key information (e.g. financial statements, audit reports; (ii) 60 percent of SOEs do balance sheets, and general corporate not announce their risk management information). policy; (iii) 51 percent of SOEs do not disclose information on transactions Anecdotal information with parties/people related to members of the board, to members of the 4.16. Some further anecdotal insight was management, and to the chairman of gained from interviews, workshops and the board; (iv) 39 percent of SOEs do not meetings (with SOE officials, government, disclose information on remuneration, civil society and development partners). Key bonus and fringe benefits for members insights include: of the board, chairman of the board, Internal disclosure is in a better situation members of the management and than external or public disclosure members of supervision parties; and (supporting the findings from the CIEM, (v) 49 percent of SOEs do not disclose 2011 study). As per the stipulation in information on the sale, purchase of Article 148 of the Enterprise Law the shares of the SOE or of other member following reports are being generated companies by members of the board, by by many SOEs: (i) consolidated financial 29 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m statement of the group of companies as government bodies are not aware of provided for by the law on accounting; (ii) and are not informed and thus unable to consolidated report on annual business control the expansion” 15. results of the group of companies; There is a perception that unless there and (iii) consolidated report on the are administrative sanctions, compliance management and direction of the group with disclosure requirements will remain of companies. However, it is pointed low. This perception is reported in CIEM out that: “the consolidated reports are (2010), which noted that “the complicated only available internally and can be made and huge number of regulations on available to line ministries and selected information disclosure by SOEs only government agencies. They are not at exist on paper with limited enforcement all available to the general public, thus validity”. Government authorities do, making it impossible for the public to however, apply measures and penalties monitor the performance of SOEs” 14. on equitized SOEs for failing to meet A CIEM and SIDA Workshop on SOE with legal regulations on information oversight organized in late 2012 noted disclosure. For example, the Securities that even information on SOEs which and Exchange Commission (SEC) has are disclosed by competent authorities recently decided to impose a penalty of are incomplete, uncertified for accuracy. VND 50 million to Vinaplast (an equitized For example as far back as 2009 and SOE) for failing to submit annual reports 2010, official reports showed Vinashin for 2010 and 2011; for the delay in was facing bankruptcy with outstanding submitting audited financial reports to debts of 86,000 billion dong. The debt SEC in 2010 and 2011 (VND 30 million); to equity ratio was 11:1. However, the and for not having updated information full accounts of debts, total assets, losses on its website16. Similar penalties have were being disclosed partially and in been applied by the Commission to an inconsistent manner. There is still a other public, listed and equitized SOEs public debate on the actual and accurate in the last few years. These penalties are figures of these data. publicly announced. EGs have expanded fast to other non- There are grounds to argue that the core business areas, but “oversight compliance of equitized companies in 14 Dr. Nguyen Kim Toan, Former Director of the Enterprise Reform Department, the Government Office (http://www.vietnamplus.vn/Home/Se-thuc-chat-giam-sat-danh-gia-doanh-nghiep-NN/201212/174467.vnplus) 15 Pham Duc Trung, Deputy Director of SOE Department of CIEM. CIEM – SIDA Workshop on Oversight on SOEs, 22 November 2012. 16 The Sai Gon Economic Times, 15 March 2013. 30 W h at i n f o r m at i o n i s c u r r e n t ly d i s c lo s e d i n V i e t n a m ? information disclosure has been better Summary than SOEs in general. For example, the 4.17. The findings from this section suggest Bao Viet Group (the only EG that has that whilst there is a considerable number been equitized until now) has become of SOEs producing information for internal much more transparent in disclosing purposes, the quality of the information its information. The company’s website needs to improve. Specifically, information is now rich in information and includes needs to become more accurate and include among others details of its financial key information to enable effective oversight position, key personnel, services and and monitoring and evaluation. The products, organizational structure, standard of public disclosure is below levels key activities in the month or the year, that can bring the benefits discussed in major deals of the company, and major Section 1. Public information is at worst non- decisions made by the board. Annual existent and at best outdated, ambiguous reports of the group are also available for and contradictory (with the exception of a download from 2008 (the year after the few large SOEs). It is also apparent that being equitization of the Group). Other SOEs in the spot light can increase the demand for with visible improvement in terms of information as many of the troubled SOEs publicly disclosed information include: have additional requirements. Vietinbank, Vinamilk17, Vinaconex, among others. 17 There is only 45 percent State Capital in Vinamilk (held by SCIC), so by some definitions it is no longer an SOE. 31 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 5. International Practice with SOE disclosure 5.1. Many countries are grappling, or have In terms of financial disclosure, the grappled, with similar SOE reform issues as Guidelines recommend that SOEs should in Vietnam. The following section provides be subject to the same high-quality examples, but first sets out guidance from accounting and auditing standards the OECD relating to the governance of SOEs. as listed companies, and that large or listed SOEs should use internationally 5.2. The OECD Guidelines on Corporate recognized standards (International Governance of SOEs provide numerous Financial Reporting Standards - IFRS). recommendations on improving transparency Accounts should be audited by and disclosure at the company level18. Key independent external auditors, based points are as follows: on the relevant international auditing Disclosure is important for many different standards. There should also be effective potential users: the government, so it can internal audit procedures, overseen by be an effective owner; the Parliament to an audit committee for the Board of play its role in reviewing the performance Directors. of the state as an owner; the media to Non-financial disclosure should include raise awareness; and the general public/ adequate information on ownership and taxpayers to get a clear picture of SOE voting structures (where there are non- performance. Government shareholders), risks and As a general principle, SOEs should be as related party transactions. Ideally, annual transparent as the “best-in-class” publicly disclosures will include management listed corporations. Where private sector discussion and analysis of performance, standards are less than adequate, SOEs including any material risk factors and (particularly listed SOEs) have a role measures taken to manage risks. Where to play in leading better corporate SOEs have non-commercial obligations, disclosure. these should be disclosed, together with their costs, funding and performance in achieving the objectives. 18 For further on the OECD guidelines see: http://www.oecd.org/corporate/ca/corporategovernanceofstate- ownedenterprises/oecdguidelinesoncorporategovernanceofstate-ownedenterprises.htm; accessed April 8, 2013. 34 I n t e r n at i o n a l P r ac t i c e w i t h S OE d is c lo s u r e 5.3. A number of OECD member and 5.5. Performance Reporting in Malaysia: non-member countries are taking steps to The Transformation Program for Government improve SOE disclosure regimes, including Linked Companies (GLCs) in Malaysia through improvements in their performance included the publication of a “Blue Book: monitoring and reporting systems. The Guidelines on Announcement of Headlines following four country examples are KPIs and Economic Profit” in 2006. The interesting from a Vietnam perspective: Guidelines provide a comprehensive reference to GLCs to ensure uniformity and 5.4. Improving Disclosure through consistency in financial and non-financial Mandatory Corporate Governance performance reporting. Each GLC has 5 to 8 Regulations in Pakistan: Poor corporate KPIs with targets along financial, customer, governance generally, and poor public and operational dimensions that are tightly disclosure specifically, has impacted the linked to its specific strategy. The targets performance of SOEs in Pakistan. To address of each KPI are benchmarked against this, the Securities and Exchange Commission comparable international peers. The CEO has issued new Public Sector Companies is responsible for the implementation of (Corporate Governance) Rules in March 2013 KPIs and for reporting them to the market. that cover a range of corporate governance Business performance reviews are conducted matters, including both financial and non- every quarter in order to understand any financial disclosure. Financial reports must major variances and to chalk out action plans be prepared quarterly and released on the to further improve performance. The Blue company website within a month of the Book also provides guidance on Economic quarter. An annual director’s report will Profit reporting, on how to deliver headline be required containing significant non- KPI results and provides a communication financial information, including subsidies checklist for GLCs. It also gives advice on how received; governance metrics such as board to manage poor or missed results.20 meetings and attendance, remuneration policies; performance indicators and results; 5.6. Use of a Centralized Reporting Portal significant plans, decisions and risks. The in Mauritius: Mauritius has a dispersed new regulations are in response to poor model of SOE ownership and suffers from compliance with the existing voluntary code. incomplete and inconsistent reporting of They came into effect in mid-2013.19 annual financial statements and performance reports. To address this problem, the 19 For further information see: http://www.secp.gov.pk/notification/pdf/2012/S.R.O283%281%292012- DraftRegulationsforComments.pdf; accessed 24 April 2013. 20 For further information see: http://www.pcg.gov.my/PDF/GLCT%20Programme%20Progress%20Review%20 %28May%202012%29.pdf; accessed 24 April 2013. 35 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m governance unit in the Prime Minister’s Office targets, and incentive-based rewards. The has established a centralized, web-based system has steadily evolved and improved reporting portal: the Parastatal Information over the past 20-plus years, and has become a Management System (PIMS). PIMS requires key tool for ensuring accountability of CPSEs SOEs to electronically submit a number of and their directors. The Department of Public generic financial (e.g revenue, costs, profit, Enterprises guidelines specify particular assets, liabilities) and non-financial (e.g. financial and nonfinancial or dynamic number of employees) measures. In addition, targets, with different weights assigned to the system provides for uploading of periodic each, based on the broad sector the CPSE financial statements (annual and quarterly operates in (loss-making companies and reports) in a PDF format. The system can those under construction have their own be accessed only within Government, with formats). A key feature of the system is that the capacity to provide differential levels of results are published and can be found on access. Take up of the system has been slow, the on the Department of Public Enterprises partly because it has not replaced existing website.22 reporting requirements, but merely added to them. In addition, the Ministries of Finance 5.8. South Korea’s Web Portal. As part of and the Prime Minister’s Office has, to date, comprehensive SOE reform efforts (outlined restricted access to the system by Line in Annex III) and to reduce the need for the Ministries, limiting the incentives for SOEs public to search numerous websites an that report to Line Ministries to comply.21 internet-based portal was set-up in 2005. This system (known by its acronym as the ALIO; 5.7. India’s Performance Management see www.alio.go.kr) provides information System: In India, Central SOEs are monitored on all public institutions in Korea, including and evaluated following negotiation of a SOEs. SOEs are (and other public institutions) performance agreement, ultimately signed are mandated to disclose operational data by the SOE and its administrative ministry. according to 34 standardized categories Established in 1986, the main goal was to of financial and non-financial information improve SOE performance by providing (initially only 20 items had to be disclosed). greater autonomy to the enterprises while See Annex III for a listing of the types of holding them accountable for results inflation posted on ALIO. through the MOU, which set out objectives, 21 For further information see: http://www.gov.mu/English/News/Pages/Public-Sector-Governance-Parastatals- Information-Management-System-Launched.aspx; accessed 24 April 2013. 22 See: http://dpe.nic.in/sites/upload_files/dpe/files/RFD_2013-14_23042013.pdf; accessed 05 September 2013. 36 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m 6. What steps could be taken? 6.1. The following credible steps could be harnessed to improve the internal improve SOE information disclosure and reporting environment. As a first step, contribute to better allocation of resources, a key feature of the ownership oversight improved SOE performance, and greater regime should be to ensure that all SOEs economic stability in Vietnam. Overlaying comply with the minimum disclosure this, is a fundamental requirement to ensure requirements, in terms of releasing that there is a political consensus around the audited financial statements within the need for reform, and an understanding of required timeframes. Improving the the benefits that reform can bring. Without a provision of information on SOE websites strong drive for reforms, groups that benefit is a key means of achieving this focus. from existing SOE disclosure policy could To improve accountability, the relevant block progress. The ideas include: ownership Ministries should check websites and publish benchmark reports i. Phase in the enhanced disclosure highlighting SOE non-compliance with process by piloting it with a select set reporting requirements. . In order to of SOEs. One such phasing could start encourage ownership Ministries to do with the Economic Groups, then expand this, they too should be monitored or to General Corporations and finally to benchmarked to ensure that they are the remaining SOEs with 100 percent carrying out their responsibilities. Not state equity. The size of the SOE sector all information needs to be shared as in Vietnam is such that some sequencing some can be genuinely designated of reforms will be required; focusing on as strategic (although this list need to larger SOEs is a good starting point. be revisited frequently and guided by ii. Focus on public disclosure and not criteria), but there must be sufficient merely on internal disclosure. This financial and non-financial information study supports the prevailing view that in the public domain (South Korea’s ALIO the internal reporting system between system described in Section 5 above and SOEs and government needs attention. in Annex III) provides a good starting However, the main efficiency return on point for what information should be information disclosure will likely come disclosed. This is an achievable reform in from public disclosure of information, the next one to two years in Vietnam. since the data, structures and skills set iii. Disclose information on the SOEs at used for effective external reporting can one central place (website), with a 38 W h at s t e p s co u l d b e ta k e n ? national agency being in charge of performance management over the coordinating the process. The task of next few years. Better coordination is collection, compilation and reporting needed from groups drafting legislation of the information to the central agency and leadership is needed to ensure the should be the responsibility of the direction of a framework is maintained SOEs. For reform to succeed SOEs need so current issues of complexity and centralized and clear coordination. A fragmentation are minimized. Data simple central web portal will help do requirements placed on SOEs should this by reducing the fragmented nature be in a consistent form, and matched of reporting (owner line ministries can to the data collection methods used be permitted to access information on internally by SOEs. Where possible, The particular SOEs despite the portal being external disclosure requirements for maintained centrally). The Korea and SOEs should also be harmonized with Mauritius examples show this is not the requirements for private sector overly complicated to get right when listed companies. This will likely require there is political will. Coordination could legislative updates, as legal provisions be enhanced via an inter-Ministerial for public disclosure are currently very oversight committee ensuring the limited. Use of the standardized portal various Ministries involved in SOE reform for the collection and dissemination do not duplicate each other’s efforts. of information within Government (as This might include strengthening the described above) would substantially NSCERD and should in either case reduce the reporting burden on SOEs involve members from the rpivaste and would provide a framework for sector and relevant NGOs and think better coordination between the various tanks. At present the Government has Ministries. Many SOEs do not have many oversight bodies relating to SOEs, systems (ICT infrastructure, capable but dilutes the government’s ability to human resources, book-keeping effectively hold SOEs accountable for systems, MIS) in place to generate a good overall performance. standard of information and reports iv. Simplify information requirements in a timely manner. By making these and build a more straight forward requirements clearer, SOEs can more legislative framework and a easily build up the required skill-sets and standardized information disclosure capacity to comply with requirements. system. Current legislation needs v. Incentivize compliance by SOEs to the to be revised in a manner that builds legislative and regulatory framework towards an effective and consistent by rewarding compliant enterprises framework for SOE disclosure and and penalizing non-complaint ones. 39 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m There is a lack of incentive to comply SOEs must also keep in dialogue with with the rules and disclose quality government and be provided with information (or put differently there is an training and clear guidelines. Some absence of penalty when not complying). elements of SOEs work remain difficult As the requirements for information to explain, including requests by disclosure are simplified a system must government for SOE to perform social be developed to ensure compliance. duties. Without this information many The South Korea experience outlined in profit and loss statements do not offer Annex III has such a system that could a true reflection of the respective SOE be adapted for the Vietnam context. and should be communicated in the respective reports. 40 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m References Binh, T. Q. (2012), ‘Voluntary Disclosure of Information in the Annual Reports of Non-Financial Listed Companies’: The Case of Vietnam’, Journal of Applied Economics and Business Research, 2(2): 69-90. CIEM (2010) ‘Assessment on the Supervision of State Conglomerates, Large Scale SOEs and Monopoly SOEs’, Central Institute for Economic Management, Ministry of Planning and investment, Hanoi. CIEM (2011) ‘Corporate Governance in SOEs in Vietnam’, Central Institute for Economic Management, Ministry of Planning and investment, Hanoi. Fforde, A. (2004), ‘Vietnamese State Owned Enterprises: ‘Real Property’, Commercial Performance and Political Economy’, South East Asia Research Centre Working Paper Series, No. 69, August 2004. Garay, Urbi, Gonzalez, Maximiliano, Guzman, Alexander and Trujillo (2012) “Internet-Based Corporate Disclosure and Market Value: Evidence from Latin America”. Joint Donor Report (2009), ‘Vietnam Development Report (2010): Modern Institutions’. See: http://www.worldbank.org/en/news/feature/2009/12/30/Vietnam-development-report-2010- modern-institutions. Joint Donor Report (2012), ‘Vietnam Development Report 2012: Market Economy For A Middle- Income Vietnam’, for Consultative Group Meeting, May 2012. See: http://web.worldbank.org/ WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/VIETNAMEXTN/0,,contentMDK:2241679 0~menuPK:387571~pagePK:2865066~piPK:2865079~theSitePK:387565,00.html. World Bank (1995), ‘Bureaucrats in Business: The Economic and Politics of Government Ownership’, World Bank Policy Research Report, Washington D.C. World Bank, Vietnam Chamber of Commerce and Industry, Irish Aid (2012), ‘Vietnam in Transition – Changing Attitudes Towards the Market and the State’. World Bank (2013), ‘Vietnam Fiscal Transparency Review’, forthcoming World Bank Country office Hanoi, Vietnam. 41 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Annex Annex I: Review of Current Legislation Impacting on SOE Information Disclosure NB: “State-owned Enterprises are those in which the State holds more than 50% of the share capital” (Article 4, Enterprise Law) What needs to be Who must How should information be disclosed? disclosed? disclose? Enterprise Law, 29 November 2005 Details of business All enterprises, >Within seven working days as from the date of grant of a registration including SOEs business registration certificate or registration of changes certificate to the in a business registration dossier, enterprises shall notice tax office, statistics to the tax office, statistics office and other competent state office agencies at the same level, the People’s Committee of the district, town or provincial city and the People’s Committee of the commune, ward or township where the enterprise’s head office is located. >Within thirty days as from the date of receiving the business registration certificate, enterprises must publish in the business website of the business registration office or in three consecutive issues of a newspaper or electronic newspaper Progress of capital All enterprises, The representative-at-law of a company must inform in contribution to the including SOEs writing the progress of capital contribution to the business enterprises registration office within fifteen days as from the date of commitment to contribute capital Increase and All enterprises, The company must inform in writing the business decrease of the including SOEs registration office its decision on capital increase or charter capital decrease within seven working days as from the date of making such decision. 43 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? Progress and All enterprises, Within ninety days as from the date the company is granted status of capital including SOEs a business registration certificate, the company must contribution inform the business registration office about equity capital contribution. Shareholders All enterprises, Shareholders owning 5% or more of the total number of owning 5% or more including SOEs shares shall be registered with the authorized business of the total number registration office within seven working days as from the of shares date they acquire that ownership percentage. Related Joint-stock Members of the Management Board, the director or general management enterprises, director and other managers of the company must declare benefits from the including all their related benefits with the company company equitized SOEs Annual statements Joint-stock >By the end of a fiscal year, the Management Board and reports enterprises, shall prepare: a/ Report on the business operation of the including company; b/ Financial statements; c/ Evaluation report on equitized SOEs the management and direction of the company; >Annual financial statements of a joint-stock company, if required by law to be audited, must be audited before they are submitted to the Shareholders’ Meeting for consideration and approval. >Joint-stock companies shall forward their annual financial statements already approved by the Shareholders’ Meeting to competent state agencies according to the provisions of law on accounting and other relevant laws. >A brief of the annual financial statement shall be notified to all shareholders. >All individuals or organizations shall be entitled to have access to or make copies of the annual financial statements of a joint-stock company at the competent business registration office. 44 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? Reduction Private >In the course of business, the owner of a private enterprise in registered companies may increase or reduce his/her investment capital in investment capital business operations of the enterprise, which shall be reflected in accounting books. Where the remaining capital after reduction is lower than the registered investment capital, the owner may do so only after registering such reduction with the business registration office. Management of Private >The owner of a private enterprise may directly manage and private enterprises companies run business operations of the enterprise or employ another person to do so. Where the latter is the case, the owner must register it with the business registration office while still taking full responsibility for all business operations of the enterprise. Leasing of private Private >The owner of a private enterprise may lease his/her entire enterprises companies enterprise, provided he/she shall report in writing thereon to the business registration office and the tax agency and such report shall be enclosed with a notarized copy of the leasing contract. Sale of private Private >The owner of a private enterprise may sell his/her enterprises companies enterprise to another person. At least fifteen days before the date of transfer of the enterprise, the owner shall notify in writing the business registration office of the transfer. Financial statements All enterprises >By the end of a fiscal year, a parent company must also of the parent including make the following reports: (a) Consolidated financial company and SOEs which statement of the group of companies as provided for by the its subsidiary are holding law on accounting; (b) General report on annual business companies companies results of the group of companies; (c) General report on the management and direction of the group of companies. >All annual financial statements and financial settlement documents of the parent company and subsidiaries and all consolidated financial statements of the whole group shall be kept at the head office of the parent company. 45 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? Division of Limited liability The Members' Council, the company owner or the enterprises company or a Shareholders' Meeting of the to-be-divided company JSO (including adopts a decision on the division of the company in one member accordance with the provisions of this Law and the liability limited company's charter. Within fifteen days as from the date of its SOE and adoption, the company division decision shall be sent to all equitized SOE) creditors and notified to employees of the divided company Separation of Limited liability The Members' Council, the company owner or the enterprises company or a Shareholders' Meeting of the to-be-separated company JSO (including adopts a decision on the separation of the company one member in accordance with the provisions of this Law and the liability limited company's charter. Within fifteen days as from the date of its SOE and adoption, the company separation decision shall be sent to equitized SOE) all creditors and notified to employees. Consolidation of Limited liability >In the case of consolidation of companies, the enterprises company or a consolidation contract must be sent to all creditors and JSO (including notified to employees within fifteen days from the date of one member its adoption; liability limited >If the consolidating company shall have a market share SOE and of between 30% and 50% in the relevant market, the equitized SOE) representatives-at-law of the consolidated companies shall report to the competition management agency before the consolidation, unless otherwise provided by the law on competition. Merger of Limited liability >The merger contract must be sent to all creditors and enterprises company or a notified to employees within fifteen days from the date of JSO(including its adoption; one member >If the merging company shall have the market share liability limited of between 30% and 50% in the relevant market, the SOE and representative-at-law of the company shall report to the equitized SOE) competition management agency before the merger, unless otherwise provided by the law on competition. >Mergers resulting in merging companies having a market share of more than 50% in relevant market shall be prohibited, unless otherwise provided by the law on competition. 46 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? Transformation of Limited liability >A limited liability company may be transformed into a enterprises company or joint-stock company or vice versa. The transformation a joint-stock decision must be sent to all creditors and notified to company employees within fifteen days from the date of its adoption. (including one member liability limited SOE and equitized SOE) Transformation of One-member >Where the owner of a one-member limited liability one-member limited limited liability company transfers part of the company’s charter capital to liability companies company or (an)other organization(s) and/or individual(s), such owner a joint-stock and the transferee(s) shall, within fifteen days as from company the date of transfer, register the change in the company’s (including number of members with the business registration office. one member >Where the owner of a one-member limited liability liability limited company transfers the whole of the company’s charter SOE capital to an individual, the transferee shall, within fifteen days as from the date of completion of transfer procedures, register the change in the company’s owner and organize the management and operation of the company in accordance with the provisions on one-member limited liability company with its owner being an individual. Business suspension All enterprises, >An enterprise has the right to suspend its business after including SOEs sending a written notice to the business registration office and tax agency on the date it suspends its business and the duration of suspension no later than fifteen days before the date of suspension or restart of its business. Dissolution of All enterprises, >Within seven working days as from the date of its enterprises including SOEs adoption, the dissolution decision must be sent to the business registration office, all creditors, people with related rights, obligations and interests, and laborers of the enterprise; such decision shall be publicly posted at the enterprise’s head office. 47 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? >If newspaper publishing is required by law, the enterprise dissolution decision must be published in at least three consecutive issues of a printed or electronic newspaper. >Within seven working days as from the date of making full payment of all debts owed by the enterprise, the representative-at-law of the enterprise must send a dossier on its dissolution to the business registration office. Annual sum-up The >“The Government shall submit to the National Assembly reports on the Government annual sum-up reports on the situation of state capital- situation of state related business, situation of state capital and assets capital-related security and development in enterprises” [Article 168]. business to the National Assembly Circular No. 121/2012/TT-BTC dated on July 26, 2012 providing regulations on corporate governance applicable to public companies. All about business, Public company >Public companies must completely, accurately and production, finance promptly disclose the periodic and irregular information and management of about their business, production, finance and management public companies to their shareholders and the public. The information and methods of information disclosure must comply with laws and the company’s charter. Besides, public companies must completely, accurately and promptly disclose other information if such information may possibly affect the securities prices, and the decisions of shareholders and investors. >The information must be disclosed using the methods that ensure the equitable access for shareholders and investors. The language used in information disclosure must be clear, comprehensible and avoid the misinterpretation of shareholders and investors. >When becoming a large-scale public company, the public company must send report to the State Securities Commission and disclose information as prescribed 48 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? Information about Public company >Public companies must disclose the information about the the company company management at the annual General assemblies of management shareholders and in the annual reports of the company as prescribed by law provisions on securities and the securities market. >Public companies must report every six (06) months and disclose the information about the company management as prescribed by law provisions on securities and the securities market. Annual operation Public company >The annual on the operation of annual shall be submitted and performance to the General assembly of shareholders reports, financial statements, business plan The reports on Public company >The reports on the operation of the Control Board the operation of shall be presented at at the annual General assembly of the Control Board shareholders. at the annual General assembly of shareholders Candidacy and Public company >The information related to the Board of Directors nomination to candidates (in case the candidates are chosen) must be members of the announce at least seven (07) days before convening the board of directors General assembly of shareholders on the company’s website so that the shareholders may study those candidates before voting. Transactions with Public company >The members of the Board of Directors, the Control related parties Board, and the executive Director (General Director)are responsible for reporting and disclosing information about the transactions in the following cases: (i) The transactions between the company and another company of which the founders or the members of the Board of Directors, the executive Director (General Director) within the previous three (03) years are the members stated above; 49 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? (ii) The transactions between the company and another company in which the members stated above are the members of the Board of Directors, the executive Director (General Director), or major shareholders; and (iii) The transactions that may bring material or non-material interests to the members stated above. Internal regulation Public company >The Board of Directors is responsible for formulating the on the company internal regulation on the company management. The management internal regulation on the company management must not contradict the current provisions on company management. The internal regulation must be announced on the company’s website. Securities Law, 24 November 2010 Public company >The information must be disclosed to the State Securities dossiers, including: Commission within ninety days after they become public (i) the company’s companies”, and “Within seven days after receiving valid charter, (ii) a copy dossiers, the State Securities Commission shall publicly of the company’s announce the names and business operations of and other business registration information related to public companies on the State certificate; (iii) brief Securities Commission’s media” [Articles 25 and 26]. One information on the of the first obligation of public companies is “to disclose model of business information according to the provisions of Article 101 of this organization, Law” [Article 27] management >NB. furthermore, the Ministry of Finance, in its circular apparatus and No. 09/2010/TT-BTC and No. 52/2012/TT-BTC also further shareholders’ requires that public and listed company have to disclose structure; and the the information on the website of the State Securities latest year’s financial Commission and on the enterprise’s website. They also statement . require that public company has one corner/ page on its website that is dedicated to providing information to the company’s shareholders (Circular 52). 50 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? Periodical All enterprises >The Securities Law also stipulates that “within ten days information on (include SOEs) after having their annual financial statements audited, financial statements. which offer public companies shall disclose periodical information securities to the on such annual financial statements 23”, and that “a public public company shall disclose extraordinary information within twenty four hours after the occurrence of one of the following events” [Article 101]. >In addition these, listed enterprises have to be subject to stricter regulations. In addition to these, “a listing organization shall also (i) disclose information within twenty four hours after an asset loss valued at 10% of its own capital or more; (ii) disclose information on a quarterly financial statement within five days after the completion of that statement; (iii) disclose information according to regulations of the Stock Exchange or the Securities Trading Center”. Circular No. No. 204/2012/TT-BTC dated 19 November 2012 on guiding the dossier and procedure for public offering of securities Details of the All enterprises >The organizations that issue their stocks must provide dossiers of (include SOEs) relevant information when the major stockholder, the application for which offer corporations, and state-owned general companies make offering their stocks securities to the dossiers of application for offering their stocks to the public. to the public public >The information in the application for public offering of securities must be accurate and contain all the essential information, must not cause confusion that affect the investors’ decisions. 23 These financial statements include: (i) a financial statement consists of an accounting balance, a report on business or production results, a cash flow report and an explanation; (ii) an issuing organization being a parent company shall submit a consolidated financial statement according to the accounting law; (iii) Annual financial statements must be an audited by accredited audit organization; (iv) if the dossier is submitted before March 1 of a year, the annual financial statement of the preceding year in the initial dossier may be an unaudited one, which, however, must be accompanied with the audited financial statements of the two previous years; (v) if the accounting period of the latest financial statement ends more than ninety days after the date of submission of the valid dossier of securities public offering registration to the State Securities Commission, the issuing organization shall make an additional financial statement for the latest month or quarter (Article 16, Securities Law) 51 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? Announcement of All enterprises >Within 3 working days as from the Certificate of securities issuance/ (include SOEs) registration of securities offering takes effect, the issuer details of securities which offer shall announce the issue on three consecutive issues of offering securities to the an electronic newspaper or newspaper that is published public nationwide. The announcement of the issue and the official prospectus must also be posted on the websites of the issuer and the Stock Exchange where the securities are posted or registered (if any) Report the offering All enterprises >The issuer must report the result of the securities offering result (include SOEs) to the State Securities Commission within 10 days as from which offer the end of the offer. securities to the >Within 7 working days as from receiving the complete public and valid report on the securities offering result, the State Securities Commission shall post the information about the reception of the report on the securities offering result on its website. Decree No. 99/2012/ND-CP dated November 15, 2012 of the Government on assignment, decentralization of the implementation of the rights, responsibilities and obligations of state owner for the state-owned enterprises and state capital invested in the enterprises Status of the MoF The Ministry of Finance annually reports to the Government debts and other on the status of the debts and other asset obligations of asset obligations the State economic groups, state corporations and other of the SEGs, state enterprises with 100% of state capital within the whole corporations and country. other enterprises with 100% state capital 52 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? Reports on the State owner State owner representative at SOE shall send periodical investment, finance representative or irregular reports on the investment, finance and and effectiveness at SOE effectiveness of use of the state capital, enterprise’s business of use of the state results. capital, enterprise’s business results of the State economic groups, state corporations and other enterprises with 100% of state capital Reports on State owner State owner representative at SOE shall send reports to line observance of the representative ministries/PPC on the observance of the law; management, law; management, at SOE use, conservation and development of the state capital in use, conservation the enterprises; the implementation of strategies, plans; to and development evaluate the implementation of the goals, tasks assigned, of the state capital results of operation, business, production efficiency of the in the enterprises; enterprises; the implementation of strategies, plans; to evaluate the implementation of the goals, tasks assigned, results of operation, business, production efficiency of the State economic groups, state corporations and other enterprises with 100% of state capital 53 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? Report to the MOF The MOF shall consolidate, on an annual basis, report to Government the Government on business, production effectiveness on business, and implementation of assigned public-utility tasks of production the enterprises in which the State holds more than 50% effectiveness and of charter capital within the whole country. To coordinate implementation of with the line-managing ministry, provincial-level People's assigned public- Committee to request the representatives to report for utility tasks of the implementing the supervision, regular examination enterprises in which and inspection in accordance with provisions on the the State holds management, use, conservation and development of State more than 50% of capital invested in the enterprises within the whole country charter capital Report to the MPI The Ministry of Planning and Investment shall consolidate, Government on the on annual basis, report to the Government on the implementation of implementation of the objectives, tasks, lines of business of the objectives, tasks, the economic groups and corporations after equitization lines of business under the line-managing ministry. To coordinate with the of the economic line-managing ministry, provincial-level People's Committee groups and to request the representatives to report for implementing corporations after the supervision, annual examination and inspection in equitization accordance with provisions on the implementation of strategies, plans of production, business and plans of investment and development in 5 years. Report on personnel MOHA Ministry of Home Affairs shall coordinate with line ministry, of the economic provincial-level People's Committee to request the State groups, and owner representatives to report on the compliance with the state economic policy and laws of the Party and State on personnel of the corporations after economic groups, and state economic corporations after equitization equitization Report on MOLISA Ministry of Labor, War Invalids and Social Affairs shall compliance with coordinate with the line-managing ministry, provincial-level policy and laws People's Committee to supervise and examine annually and on recruitment; inspect in accordance with provisions on the compliance remuneration, with policy and laws on recruitment; remuneration, salaries salaries and bonuses and bonuses of the enterprise. of the enterprise 54 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? Decree No. 101/2009/ND-CP dated November 05, 2009 of the Government on pilot establishment, organization, operation and management of state economic groups Prepare and disclose SEG Holding company shall prepare annual financial statements annual financial and disclose annual financial to the public, and provide report to the public necessary information for accurate assessment of their operation effectiveness (Article 19). Annual reports SEG The Board of Directors of a parent company shall make and extraordinary annual reports and extraordinary reports at the request of reports at the the Government and the Prime Minister on the following: request of the (i) The direction and results of direction of its economic Government and group to realize objectives, including business objectives the Prime Minister in its main business lines, and fulfill tasks assigned by the state owner to its groups; (ii) Portfolios and the structure of investment in main and unrelated business lines; (iii) The raising of capital for investment in finance, banking real estate and securities; (iv) Forms and levels of association among enterprises of its economic group; (v) Organization and personnel work of the parent company: human resources engaged in main, related and unrelated business lines; and (vi) Regulations of the parent company on issues which must be adopted by the parent company before its authorized representatives in member enterprises decide or participating in deciding on them (Article 41). DECISION 192/2004/QD-TTG DATED 16 NOVEMBER 2004 OF PRIME MINISTER regarding the Regulation on Fiscal Transparency of State Budget, Budget Unit, Institutions financed by State Budget, Capital Investment Project financed by State Budget, SOEs, and Fund with funding from State Budget and Contribution of the People Corporate fiscal All SOEs >President of Management Board, General Director information or Director of SOE shall be responsible to disclose the following information: (i) Financial situation; (ii) Result of business activities; (iii) Creation, contribution and use of SOE Funds; (iv) SOE contributions to National Budget; (v) Employees Income and average income; and (vi) Amount of Government Contributions and effectiveness of these contributions in SOE or other organization 55 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m What needs to be Who must How should information be disclosed? disclosed? disclose? >The disclosure of financial information will be implemented in the forms of printed documents, notice at SOE office within 90 days, and financial report in annual meeting of all employees and staffs. >The discljosure shall be implemented 120 days after the end of calendar year. (Article 12 and 13) Circular 29/2005/TT-BTC dated 14 April 2005 of Ministry of Finance on fiscal transparency of SOEs Corporate fiscal All SOEs >President of Management Board, General Director or information Director of SOE shall disclose the following information: (i) Financial situation (asset, capital, liabilities,...); (ii) Result of business activities; (iii) SOE contributions to National Budget; (iv) Financial report explanations; (v) Creation, contribution and use of SOE Funds; (vi) Employees Income and average income; (vii) Amount of Government Contributions and effectiveness of these contributions in SOE or other organization >The disclosure shall be implemented within 120 days after the end of calendar year and will be in the format of: (i) Printed documents; (ii) Notice at SOE office within 90 days; and (iii) Financial report in annual meeting of all employees and staffs. Circular 03/2005/TT-BTC by the Ministry of Finance on Disclosing Fiscal Information of State Budget at Different Level and on Fiscal Information Reporting State Budget MOF and >Disclosure to the public information on Central State estimation, Provincial Budget estimation, settlement accounts, including State settlement People’s Budget estimation, settlement accounts, expenditures of accounts including Committees Central Budget and budget expenditure of local budget “investment and (PCC) according to the budget which has been approved and capital support for ratified by the National Assembly. Method of disclosure: State enterprises; the disclosure of budgetary information as indicated at State economic 1.1, article 1 of this circular shall be implemented in the organizations, following methods: written notice to ministries, ministerial 56 Annex What needs to be Who must How should information be disclosed? disclosed? disclose? and State financial agencies, Government agencies, other agencies at Central organizations; level, People’s Council ant People’s Committee at Provinces, contribution of and cities; publications and public announcement at the share capital and website of the Ministry of Finance ( www.mof.gov.vn) equity capital to >Disclose budgetary information of provinces and cities joint ventures with which are under Central Government management enterprises in areas (generally referred to as provincial budget). Budgetary that require the information to be disclosed includes information on participation of the budget estimation, final settlement accounts of provincial State” (as defined in budgets which were approved and ratified by provincial State Budget Law); People’s Committee. Method of disclosure: the disclosure of budgetary information as indicated at 2.1, article 2 of this circular shall be implemented in the following methods: written notice to provincial government agencies, Provincial People’s Council ant People’s Committee at Provinces, People’s Council ant People’s Committee at districts level; publications and public announcement on websites (applicable to provinces and cities which have official websites) . 57 Annex II: Website Information Status Checks for SOEs: April 2013 Name SOE Website If website then content (yes or no) by category: Type Annual (EG/ Major report/ GC/90) Company Info. on Decisions/ Company Financial News/ Financial Resolution Overview Statement/ Strategy Performance by Board/ Auditors Management report Housing and Urban Development GC www.hud.com.vn ü û û û û Corporation Song Da Corporation GC www.songda.vn ü ü û û ü Vietnam Northern Food Corporation GC www.vinafood1.com.vn ü ü û û û Vietnam Southern Food Corporation GC www.vinafood2.com.vn ü û û û û Vietnam Paper Corporation GC www.vinapaco.com.vn ü û û û û Vietnam National Coffee Corporation GC www.vinacafe.com.vn ü û û û û 58 Vietnam Airlines Corporation GC www.vietnamairlines.com ü û û û û Vietnam National Tobacco Corporation GC www.vinataba.com.vn ü û û û û Vietnam National Shipping Lines GC www.vinalines.com.vn ü ü û û ü Vietnam Railways GC www.vr.com.vn ü ü û û ü Vietnam Steel Corporation GC www.vnsteel.vn ü ü ü ü ü Vietnam Cement Industry Corporation GC www.vicem.vn ü ü û û û Vietnam Posts and Telecommunications EG www.vnpt.com.vn ü ü û û û Group (VNPT) Vietnam National Coal – Mineral Industries EG www.vinacomin.vn ü ü û û û Holding Corporation Limited (VINACOMIN) T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Vietnam Oil and Gas Group EG www.pvn.vn ü ü û ü û Vietnam Electricity EG www.evn.com.vn ü ü û û û The Vietnam National Textile and Garment EG www.vinatex.com ü ü û û û Group Vietnam Rubber Group EG www.vnrubbergroup.com ü ü û ü û Name SOE Website If website then content (yes or no) by category: Type Annual (EG/ Major report/ GC/90) Company Info. on Decisions/ Company Financial News/ Financial Resolution Overview Statement/ Strategy Performance by Board/ Auditors Management report BaoViet Holdings (BVH) EG www.baoviet.com.vn ü ü ü ü ü Viettel Group EG www.viettel.com.vn ü ü û ü û Vietnam National Chemical Group EG www.vinachem.com.vn ü ü û û û Vinashin Business Group EG www.vinashin.com.vn ü ü û û û Vietnam National Petroleum Group EG www.petrolimex.com.vn ü ü û ü ü Vietnam Electrical Equipment Joint Stock 90 www.gelex.vn ü ü ü ü ü Corporation Vietnam Electronics and Informatics Joint – 90 www.viec.com.vn ü ü ü ü ü Stock Corporation Machines and Industrial Equipment 59 90 www.mie.com.vn ü ü û û ü Corporation Saigon Beer Alcohol and Beverage Joint 90 www.sabeco.com.vn ü ü û ü ü Stock Corporation Vietnam Engine and Agricultural 90 www.veam.com.vn ü ü û û û Machinery Corporation Vietnam Industrial Construction 90 www.vinaincon.com.vn ü û û û ü Corporation Hanoi Beer Alcohol and Beverage Joint 90 www.habeco.com.vn ü ü û ü ü Stock Corporation Vietnam National Company for Vegetable 90 www.vocarimex.com.vn ü ü û û û Oils, Aromas and Comestics Contruction Corporation No.1 90 www.cc1.net.vn ü ü ü û û Building Materials Corporation No.1 90 www.fico.com.vn ü û û û û Vietnam Construction and Import – Export 90 www.vinaconex.com.vn ü ü ü ü ü Joint Stock Corporation Mien Trung Corporation 90 û - - - - - Annex Name SOE Website If website then content (yes or no) by category: Type Company Company Info. on Annual Major (EG/ Overview News/ Financial report/ Decisions/ GC/90) Strategy Performance Financial Resolution Statement/ by Board/ Auditors Management report Vietnam Urban and Industrial Zone 90 www.idico.com.vn ü ü û û û Development Investment Corporation Civil Engineering Construction Corporation 90 www.cienco1.com ü ü û û û No.1 Civil Engineering Construction Corporation 90 www.cienco4.com ü ü û û û No.4 Civil Engineering Construction Corporation 90 www.cienco5.com ü û û û û No.5 Civil Engineering Construction Corporation 90 û - - - - - No.6 Civil Engineering Construction Corporation 60 90 www.cienco8.com ü ü û û û No.8 Thang Long Construction Corporation 90 www.thanglonggroup.com.vn ü ü û û û Vietnam Waterway Construction 90 www.vinawaco.vn ü ü û û û Corporation Vietnam Motors Industry Corporation 90 www.vinamotor.vn ü ü û û û Transport Engineering Design Inc 90 www.tedi.vn ü ü û û û Waterway Transport Corporation 90 û - - - - - Southern Waterborne Transport Joint Stock 90 www.sowatco.com.vn ü ü ü ü ü Corporation Vietnam Trading Engineering Construction 90 www.vietracimex.com ü ü û û ü Joint Stock Corporation T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m www.tsnairport. Southern Airports Corporation 90 ü ü û û ü hochiminhcity.gov.vn Vietnam Air Navigation Services 90 www.vatm.vn ü ü û û ü Corporation North Airports Corporation 90 û - - - - - Name SOE Website If website then content (yes or no) by category: Type Company Company Info. on Annual Major (EG/ Overview News/ Financial report/ Decisions/ GC/90) Strategy Performance Financial Resolution Statement/ by Board/ Auditors Management report Middle Airports Corporation 90 www.mac.org.vn ü ü û û ü Fruit and Agricultural Product Corporation 90 www.vegetexcovn.com.vn ü ü û û ü Limited Vietnam General Corporation of 90 www.vigecam.vn ü ü û û û Agricultural Materials Vietnam Sericulture Corporation 90 û - - - - - (Bankrupted) Vinasugar 1 Corporation Limited 90 û - - - - - Vinasugar 2 Corporation Limited 90 û - - - - - The Agriculture & Irrication Mechanization 90 www.agrimeco.com.vn ü ü û û ü 61 Electrification – Construction Corporation Hydraulic Construction Corporation No.4 90 www.thuyloi4.com.vn ü ü ü ü ü Joint Stock Company Vietnam Forest Corporation 90 www.vinafor.com.vn ü ü û û ü Vietnam National Livestock Corporation 90 www.vilico.vn ü ü û û ü Agricultural of Construction & Rural 90 www.vinacco.vn ü ü û û ü Development Limited Corporation Vietnam National Seaproducts Corporation 90 www.seaprodex.com ü ü û û ü East Sea Fishery Corporation (Merged to 90 û - - - - - SEAPRODEX) Halong Fishery Corporation (Merged to 90 û - - - - - SEAPRODEX) Vietnam Medical Equipment Corporation 90 www.vinamed.com.vn ü ü û û ü Vietnam Pharmaceutical Corporation 90 www.vinapharm.net.vn ü ü û û ü Truong Son Building Corporation 90 û - - - - - Thanh An Corporation 90 www.binhdoan11.vn ü ü û û û Annex Name SOE Website If website then content (yes or no) by category: Type Company Company Info. on Annual Major (EG/ Overview News/ Financial report/ Decisions/ GC/90) Strategy Performance Financial Resolution Statement/ by Board/ Auditors Management report 28 Corporation 90 www.agtex.com.vn ü ü û û û 15 Corporation 90 www.tongcongty15.com.vn ü ü û û û Military Petroleum Corporation 90 www.mipecorp.com.vn ü ü û û û Tan Cang Corporation 90 www.saigonnewport.com.vn ü ü û û ü Thai Son Corporation 90 www.thaisoncorp.com.vn ü ü û û ü International Cooperation Corporation 90 www.coecco.com.vn ü ü û û û Vietnam Helicopter Corporation 90 www.vnh.com.vn ü ü û û û Vietnam Natural Resource and 90 www.vinanren.vn ü ü û û ü Environment Corporation 62 Sai Gon Building Corporation 90 www.saigoncons.com.vn ü ü û û û Sai Gon Commerce Corporation 90 www.satra.com.vn ü ü û û û Sai Gon Water Supply Corporation 90 www.sawaco.com.vn ü ü û û ü Sai Gon Property Corporation 90 www.rescovn.com ü û û û û Sai Gon Tourist Corporation 90 www.saigon-tourist.com ü ü û û û Ben Thanh Corporation 90 www.benthanhgroup.com ü ü û û û Sai Gon Culture Corporation 90 www.scpc.com.vn ü ü û û ü Sai Gon Mechanism and Transportation 90 www.samco.com.vn ü ü û û ü Corporation Sai Gon Agricultural Corporation 90 www.sagri.com.vn ü ü û û û T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Sai Gon Industrial Corporation 90 www.cns.com.vn ü ü û û ü Manufacture & Trading imported & exported printing paper & packing Liksin 90 www.liksin.com.vn ü ü û û ü Corp. Hanoi Housing Development and 90 www.handico.com.vn ü ü û û û Investment Corp. Name SOE Website If website then content (yes or no) by category: Type Company Company Info. on Annual Major (EG/ Overview News/ Financial report/ Decisions/ GC/90) Strategy Performance Financial Resolution Statement/ by Board/ Auditors Management report Hanoi Tourist Corporation 90 www.hanoitourist.com.vn ü ü û û û Urban Infrastructure Development 90 www.udic.com.vn ü ü û û û Investment Corporation Hanoi Trade Corporation 90 www.haprogroup.vn ü ü û û û Hanoi Transport & Services Corporation 90 www.transerco.vn ü ü û û û Khanh Viet Corporation 90 www.khatoco.com ü ü û ü û Ha Tinh – Mineral and Trade Corporation 90 www.mitraco.com.vn ü ü û û û Dong Nai Food Industry Corporation 90 û - - - - - Vietnam Multimedia Corporation 90 www.vtc.org.vn ü ü û û û 63 Global Telecommunications Corporation 90 www.gtel.com.vn ü û û û û Note: Information on financial performance is ticked present if basic and simple information is provided on the website. Annex T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m Annex III: South Korea’s Experience with SOE Information Disclosure This section of the report is based on content as an owner. There are currently 295 public by Professor J. Park who worked with the institutions, and According to the Public Vietnam government as a World Bank Institution Management Act (2007), they consultant in January 2013. Professor J. Park are of three distinct types: (i) SOEs; (ii) quasi- has extensive experience working on SOE governmental institutions and (iii) other public reform in Korea in academia and as former institutions (see Table A1). To be classified as Executive Director at the Research Center an SOE requires an entity to have more than for SOEs (part of Korean Institute of Public 50 employees and generate at least 50 percent Finance) between 2010 and 2011. of its total revenues itself. Furthermore when an SOE has an own-revenue share of more Background on SOEs in South Korea than 85 percent it is further categorized as Most SOEs in were established prior to a commercial SOE (otherwise it is deemed a 1983 and operated to develop the Korean semi-commercial SOE). economy. Since there have been widespread reforms and performance has been improved Ownership and Oversight of SOEs considerably. However, the reforms have The ownership function of SOEs has taken time and are best explained as being since 2007 been overseen by an Inter- incremental and iterative. Whilst South Korea Ministerial Steering Committee (replacing looked at proceedings in other countries their similar oversight bodies). At present the reforms were based on the Korean context. Committee consists of up to 20 members, Privatization was the not the chief reform nominated by the President and chaired instrument and instead SOE managers were by the Minister of Strategy and Finance. credibly asked (and in some cases pushed) Many Vice Ministers from line Ministries to perform by government (via promises of sponsoring SOEs are appointed of members reward or punishment by SOE managers). The to the Committee, but more than half of its period of the reforms was complemented by members are private sector experts. The a track record of fiscal discipline. SOE reform Ministry of Strategy and Finance acts as had low political costs because SOEs were secretariat to the Committee. Despite the already being run relatively efficiently (SOEs had not been used to create jobs as in other committee’s oversight role sponsoring line countries) and government had the capacity ministries retain the right to nominate CEOs to overcome resistance to reforms. and executive directors (except for the large SOEs with economic importance, whose SOEs in South Korea today CEOs are nominated by the President). External directors are appointed by the A changing composition of the SOE portfolios Steering Committee. of government has altered the state’s role 64 Annex Table A1: Public institutions in South Korea (as of end 2012) SOEs Quasi- Other Total Governmental Public Commercial Semi- Institution Institutions Commercial Number of organization 14 16 87 178 295 Number of employees 93,789 69,358 90,030 253,177 Size of assets (billion US$) 444.6 184.0 25.7 654.2 Source: Korea Institute of Public Finance (2013) Key reform areas of the last 10-15 years Transparency and Disclosure of SOEs in Korea There have been three key areas of SOE The current framework for SOE information reform in Korea: disclosure was finalized in 2007 following the establishment of the Inter-Ministerial i. Legal and regulatory frameworks: have Steering Committee (CPIM). The framework been adjusted by formally classifying is designed to publicly provide information groups of SOEs according to operational with the aim of improving SOE efficiency. structure and the nature of their In the past, information relating to the objectives (commercial versus public management of SOEs was disclosed in service). part, or not at all, and disclosure was not ii. State acting as an owner. Clear ownership standardized across SOEs making it hard to policies have been developed since 2005 compare management information across through legislation and altered the way SOEs. Also members of the public had to that ownership rights are exercised search through individual websites of each within government toward a greater institution making comparison between centralization of the ownership function. different SOE time consuming. Korea has established inter-ministerial Committee for Public Institution In 2005 an internet-based open information Management to better coordinate SOE system for public institutions was created ownership. (known by its acronym as the ALIO; see www. iii. Transparency and disclosure. The rules alio.go.kr). The system provides information have been improved in favor of greater on all public institutions in Korea, including disclosure of information by SOEs. This SOEs. SOEs are (and other public institutions) is now the focus of this report. are mandated to disclose operational data according to 34 standardized categories 65 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m of financial and non-financial information Regular disclosure: required at a certain (initially only 20 items had to be disclosed). time –the end of a year, biannually Table A2 below sets out what information is or quarterly. (For example the size provided. of workforce, financial information, and salaries of employees including Items for disclosure can be classified as executives). for regular disclosure and for voluntary occasional disclosure. Table A2: Violation Criteria and Associated Penalty Categories Items Disclosed Categories Items Disclosed General status >General status Internal and >Feedback from the National external Assembly evaluation >Feedback from the Board of Operation of >Number of employees Audit and Inspection institution >Status of executive body >Feedback from the >New employment competent ministries >Annual salary of executives >Results of management >Average monthly salary of performance evaluation employees >Feedback in management >Business expenses of CEO performance evaluation >Welfare expenses >Results of customer >Details of executive business satisfaction surveys trips overseas >Results of auditor’s job >Status regarding labor unions performance evaluation >Rule of employment >Minutes of directors’ meeting >Results of internal audit Management >Condensed balance sheet Public Notice >Examples of management performance >Condensed income statement innovation and core >Revenue and expenditure >Employment information projects >Core projects >Bidding information >Details of investment execution >Research report >Capital and shareholders >Other information >Short and long term borrowings >Investment and contribution >Annual endowments and grants >Management overhead costs 66 Annex Occasional disclosure: required on Act requires standardized disclosure on the an ad hoc basis, but required within ALIO website with penalties if information 14 days of the change (For example is not disclosed. To ensure accuracy of the findings by outside organizations, board materials disclosed the Ministry of Strategy meeting records, information on new and Finance checks and confirms the employment and bidding). information and has the authority to penalize unfaithful disclosure started in 2009. The The framework can adapt to changes and penalty system involved issuance of penalty to requests for new or different information points as illustrated in Table A3. Table A4 from the National Assembly. When necessary shows the consequences of accumulation the required information can be revised. The of policy points and the system incentives Ministry of Strategy and Finance however good performance by SOEs as CEOs and must establish the requirements prior to employees’ remuneration can vary as a result the beginning of the financial year, after deliberation and resolution by the CPIM. The information disclosure system in South Korea has so far contributed to achieving All public institutions, including SOEs, must a goal of improved transparency and disclose management information as per accountability. That withstanding there is the Public Institution Management Act. The still work to do to improve. It’s argued that Table A3: Violation Criteria and Associated Penalty Type of Unfaithful Content of violation Penalty Disclosure Non-conformance with >Penalty is imposed on each item not disclosed > 5 points disclosure rules >Late disclosure more than 6 months > 4 points >Late more than 1 month > 3 points >Late after 1 week from deadline > 2 points >Late within 1 week > 1 point False disclosure >False disclosure discovered by the external > 5 points agency (parliament, Board of Audit, government ministries etc. >Penalty is imposed on each item Disclosure correction >When an institution discloses management >1 to 5 points information that is not true, due to inadvertent errors, etc. and subsequently rectifies the error, penalty is imposed on each instance of correction 67 T r a n s pa r e n c y o f SOE s i n V i e t n a m : C u r r e n t s tat u s a n d i d e a s f o r r e f o r m the system should make the naming and have been assessed and improved over shaming approach stronger and indexation time. of performance would help the public iv. Privatization was the not the chief reform compare the companies in similar industries. instrument and instead SOE managers were credibly asked (and in some cases Key Reform Principles pushed) to perform by government (via i. SOE reform in Korea took over three promises of reward or punishment by decades to get to its current state and SOE managers). are best explained as being incremental v. The period of the SOE reforms was and iterative. complemented by a track record of fiscal ii. Whilst South Korea looked at proceedings discipline. in other countries their reforms were vi. SOE reform had low political costs based on the Korean context. because SOEs were already being run iii. The South Korean experience is relatively efficiently (SOEs had not been characterized by ‘learning by doing’. used to create jobs as in other countries) The nature of required information, the and government had the capacity to period of disclosure and penalty system overcome resistance to reforms. Table A4: Criteria and Details of Ex post Measures Criteria Details >More than 10 points >Institution warning >More than 20 points or >Designate the institution as an unfaithful institution and impose two consecutive years >Appropriate measure against the personnel involved institution warning >Negative reflect to the management performance evaluation 68