Why Are Simple Questions about Vietnam’s State Owned Firms Hard to Answer?

June 2, 2014

Gregory Smith Tuoi Tre Newspaper (Vietnamese)

The National Assembly is currently discussing a draft law on investment and management of state capital in state owned enterprises (SOEs).  The new law is needed to address several issues, including that it’s hard to answer simple questions about SOEs that together represent a third of GDP in Vietnam.

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). Better public disclosure - in terms of volume and quality - could bring substantial benefits.

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. Decree 61 (June 2013) pushed for improved public disclosure by SOEs,but there’s work to be done. The existing stock of regulation still falls short of providing for an effective legislative framework. There is some obligation on SOEs to publicly disclose financial and non-financial information, but instruction is fragmented and hard to follow. There are also issues with enforcement, monitoring and level of detail of the requirements; so that in practice many SOEs disclosing substantial information publicly are doing so on a voluntary basis.

That said Vietnam has made recent progress with the general provision of open and online data. A recent publication by the Arachnys Open Data Compass finds Vietnam is ‘already a big hitter in the region’, placing second among the ASEAN group of nations when they measured on the general availability of corporate data online, although this wasn’t focused on SOEs.

Inspired by World Bank colleagues work on the disclosure of land management regulations we took a look at what information has been generated and posted online by SOEs. Last year we trawled the web and found 89 Vietnamese SOEs with websites, including 11 Economic Groups and 12 General Corporations. Whilst there’s a considerable number of SOEs producing useful information, the quality of information needs to be improved. We found that only 9 percent provided summarized financial information and only 16 percent an annual report, financial statement or auditors report. The findings from the study also suggest that despite the lack of online material SOEs are producing information for internal purposes. This information needs not only to be shared widely, but effort is needed to improve its quality, especially to make it useful for monitoring and evaluation. The plan is to repeat the exercise again this year to see if there’s been improvement.

It’s also worth reflecting on a study carried out by CIEM in 2010 that found nearly all SOEs produced reports for owner line ministries and agencies, but only 7 percent had widely circulated publications and only 9 percent —of the 290 SOEs sampled—utilized mass media. Interestingly when they examined just equitized SOEs, many more reports were widely circulated with 32 percent using mass media at the time.This suggests that equitized SOEs are more likely to disclose information, although state disinvestment has been slower than expected.

Further examples support the view that the compliance of equitized companies in information disclosure has been better than SOEs in general. For example, the Bao Viet Group (a now equitized Economic Group) has become more transparent in disclosing information. The company’s website is now rich in information and includes details of its financial position, key personnel, services and products, organizational structure, key activities, major deals, and major decisions made by the board. Annual reports of the group are also available for download from 2008 (the year after the equitization of the Group). Other SOEs with visible improvement in terms of publicly disclosed information include: Vietinbank, Vinaconex and Vinamilk among others. It’s also apparent that troubled SOEs in the spotlight generate more public information, as interest and media attention grows.

Drives for SOEs to provide more and better quality information to government and citizens should be welcomed and encouraged. Improved public disclosure will make it easier to answer questions about SOEs finances and operations. The discussions by the National Assembly on the draft law represent a key opportunity to strengthen the transparency of SOE finances and operations.