Vietnam Economy 2021: Do “leading cranes” remember “iron punches” while taking off?

Prime Minister Nguyen Xuan Phuc speaking at the 2018 Business Summit.

The Vietnamese government has proposed a “leading cranes” model for the new stage of economic growth, but critics say this is not something new, and the country needs to learn from “steel punches” once as they became an economic burden.

The Ministry of Planning and Investment chose Mobifone, EVN, and Viettel to represent three fields of telecommunications, energy, and defense industry to participate in piloting their own policies … The ministry has just submitted to the PM a draft project for the development of large-scale state-owned enterprises, especially multi-owned state economic groups,” VnExpress announced.

VTV adds about the purpose of the selection and the pilot:

This is the first time to propose pilot implementation of specific policies for selected businesses to promote the formation of ‘leading cranes’.”

According to the Ministry of Planning and Investment, these are important sectors for the development and security of a country, including the following factors: supply of indispensable input materials for production-trade activities, provide infrastructure in the digital transformation era, industrial revolution 4.0, and ensure national defense.”

The Ministry of Planning and Investment said that enterprises choosing to play the role of ‘leading cranes’ will promote the role of paving the way and leading state-owned enterprises in the formation and expansion of production chains, supply and value chain in the country, the region and the world.”

Stuck by thought and interest?

Many important economic sectors and businesses in Vietnam are still under exclusive state ownership

From Hoi An, economist Bui Kien Thanh commented to BBC:

I have watched this development, in my opinion, this is a manifestation of a backward thinking of those who are used to the concept in which the state firms are very important while the private companies are playing minor roles.”

This manifestation clearly shows that Vietnam is still in such a dogmatic mindset and policy, so there are such stupid proposals.”

In the US or in many places, the leading economic organizations are not state-owned, what does the state go into to do business for?”

The state is ambitious to jump in to control economic corporations, to do business directly through it, in my opinion, it should not be and cannot be done, so whoever raised this idea if not the interests of the state group, behind the shield of the state economy to gain an advantage, it only proves that there are still problems, not yet escaped from the thinking of the veteran Marxists from the eighteenth century.

If there is such a mindset, then Vietnam will never be able to develop, remember that the big economic groups in the world are state-owned or not? Even people see that in order to be effective, they must be privatized immediately. The economic history shows that from the big economic groups when Thatcher was UK’s prime minister, to the big French corporations when they see the need to privatize, they must move forward to focus on the role of the state as state management, is not to enter the business market and compete with the private sector and other actors.”

I note that Vietnam has many strange thoughts, they seem to be afraid of the role of the private economy, the private business, so they even avoid or dare to use the word ‘privatization’ but used the term ‘equitization’. This is very ridiculous as they say they equitize but sell only 5% and 10%, then they say they have finished equitizing while the state still keeps controlling shares of those groups.”

And next, they put civil servants into the job of controlling enterprises, like the military, put military officers in it, so how does it develop purely according to the market economy and development? is normal, healthy, and it is important to remember that there may be times when people use international law through the agreements and treaties they have signed to see if they really do not interfere with commitments.”

So in my opinion, this thought and its offspring patterns that arise above will not help Vietnam develop a healthy, true future, it only helps the bulky states. It only increases the expansion, why the claim is to enter the market economy for so long, without learning how humanity progresses, but still following the centralized economy of state power like So I frankly disapprove of these thinking and models.”

Or will “cranes” become “sparrows”?

Vietnamese leadership in previous periods used to experiment in many ways and scenarios

From Hanoi, Doctor of Science Nguyen Quang A told the BBC:

I think that the state economy should continue to control the public service sector and the private sector should be allowed to do whatever it can.”

And the so-called ‘crown crane’ or many other euphemisms is one of the metaphors that some outside economic theorists have put forth a long time ago, now I think there is no need to go over those words but have to look at the essence.”

Mobifone, EVN, and Viettel have to see really what they can make, what technology, what products, but when they are favored by the state, they can have a development that is supposed to be ‘spectacular,’ but behind that ‘spectacular’ development is the state-supported development in terms of monopoly, on the market side, on one side, on the other, I think this is a big issue to discuss.”

And I am very afraid that bringing up some state-owned enterprises like ‘steel punch’ is no different from state-owned economic groups that then Prime Minister Nguyen Tan Dung had advocated for at the end of 2005 onwards, but in the official state newspapers at that time, from April 2006, I warned that it would fail to do that anyway.

And we have seen that from Vinashin to Vinalines, those ‘steel punches’ have all become ‘rag punches,’ so I am also very concerned that those ‘cranes’ might end up together to become ‘sparrows’ without knowing it, and these are issues that need to be discussed very widely, need to hear opinions different.”

But according to the own will of a few people to ‘learn’ according to the rhetoric of some economic theorists that may be out of date, then I think if you just work hard. As such, it can be very dangerous, even unpredictable.”

Which criteria for selection?

Construction newspaper, under the Ministry of Construction in an article in the summer of December 2020 and at the end of the year, added about the criteria that three enterprises Mobifone, EVN, and Viettel were selected by the Ministry of Planning and Investment for the leading crane model. The newspaper wrote:

In the draft of the project, the Ministry of Planning and Investment provides the criteria to define a large-scale state-owned enterprise. In which, this enterprise must meet the requirements of the size of assets or charter capital with proposed minimum charter capital of VND1.8 trillion ($78 million).

In addition, these businesses must be able to expand their market and increase their market share. In which, they must achieve a large enough market share to be able to dominate the market (proposed at 30% market share). above).

The large-scale state-owned enterprises, as selected by the project, must also have a good governance system, meet the requirements of cost-saving, improve capital efficiency, apply advanced science and technology.”

This group of enterprises must operate in the pervasive and leading industries (not in the State monopoly sector or fields) such as economic infrastructure, industry, energy, telecommunications, and the bank itself.”

The final condition given by the Ministry of Planning and Investment to determine a large-scale SOE is to operate under the provisions of the Enterprise Law (which is a company with 100% state capital or capital contribution or equity dominant part of the State); Law on management and use of state capital invested in production and business in enterprises.

In particular, this ministry proposes to give priority to enterprises that have diversified their own or have the ability to diversify ownership in the coming time, the State will hold 50% or more capital.”

Leading crane” fly, don’t forget the “steel punches

Vietnam’s current economic context has changed compared to the previous years, the opinion of policy experts noted.

From the Institute of Policy & Development, under the Ministry of Planning and Investment, Associate Professor Pham Quy Tho gave his comment:

There is a difference here from the previous period, in the previous period there was a very big policy, based on the ‘steel punches’ we already know, that is based on the pillars of state-owned enterprises.”

In this period, in my opinion, it is more symbolic, but it has two problems, one is the unforeseen risks, in which there is not only the risk that they are state-owned enterprises. With three representatives in three fields, but it also has another risk, that is when a state-owned enterprise and the military is involved, including Viettel, which is notorious in Myanmar, has may violate the principles that in the major international, regional agreements that Vietnam has signed, besides being a military, there may be aspects and areas that are difficult to manage, publicly related, and transparent.”

In addition, at present, Vietnam is also in the anti-corruption and negative stage in corporations, one might plan to take these three enterprises as a pilot to be motivating, but in the personal opinion, I also don’t think this is a great initiative so that in 2021 it can promote businesses the way people call the ‘top cranes’ because it is still a lot of difficulties and risk in 2021 for sure.”

In terms of thinking, this is certainly not something new or like a step forward, but people are facing difficult, almost impossible to rise in large fields and in the process of equitization. It is also very deadlocked, directly assessing that in the past term, equitization has not achieved the set goals, has not yet taken the private enterprise as an important driving force, so now return to the other is the huge risk in terms of ownership.”

But if you create a big policy, from three, it will become multi, become many, then it will repeat the mistake of the previous period, which is very difficult from this state enterprise. It is very difficult to pull Vietnamese enterprises, in general, to do business in the new context, it is very difficult, without being able to repeat the old trail, the concentration of state economic power is too much, too preferential and moderate, can be easily examined by international and regional people and they can sue, such as the US have sued or sanctioned Vietnamese firms for having the support of the state, unfairly favoring Vietnamese enterprises, causing disadvantages for products, business, and markets of partners.”

On the other hand, it can also create an environment for interest groups to operate, hide the state and possibly repeat the wrongs of the management of assets, capital, etc. of the state such as in the era of Vinashin and Vinalines although it may be in other forms, in short, I think that it is important to pay attention to the risks and the ‘Cranes’ before flying, perhaps to remember what happened to the ‘Steel Punches’ once caused a lot of concern and scandal,” public policy experts told BBC on December 31, 2020. (Translated)


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