State management over corporations 90 – 91 towards forming economic groups

structured according to several models as follows: First, as per the relationship among the member entities, Corporations are organized according to one of the following three: - Model of horizontal linking; - Model of lengthwise linking; - Model of mixed linking. 9 Second, as per size of capital of Corporation: - Corporation 91 (established under Decision No. 91/TTg dated March 7, 1994), according to scheme upon establishment, it had to have a minimum chartered capital of VND 1,000 billion. - Corporation 90 (established under Decision No. 90/TTg dated March 7, 1994), those Corporations established according to this model has to have a minimum chartered capital of VND 500 billion. 1.1.2. Economic Groups 1.1.2.1. Generalization of Features and Conditions for the Formation of Economic Groups Definition of Economic Group: Economic group is an economic group comprised of economic entities operating within a line or lines of business, within a country or countries, having close relation in terms of economic, technological, and marketing benefits. The chief goal of economic groups is to optimize profit on the basis of husbanding resources of labour, technology, finance, intelligence… a. Basic Features of Economic Group Economic group is of large size in terms of capital, turnover and scope of activities. - Multi-disciplinary, multi-area activities; - Diverse in terms of organization and ownership; - Economic groups often have R & D centers; - Economic groups are often organized, managed, operate in clear order, and controlled in an intensive manner. b. Conditions for the Formation of Economic Groups: - Effect of rule of competition in the market economy; - Effect of advances of science-techniques and technology; - Demand of stimulating and concentrating capital, reducing business expenses, and minimizing payable taxes; 10 - The tendency toward globalization has been becoming a decisive factor which governs the formation and development of economic groups. 1.1.2.2. Types of Economic Group First, classification of economic according to level of linking First, Cartel is a type of business group. Second, Syndicate is a special form of Cartel. Third, Trust is a business group, formed through the exclusive union of business and production organizations as industrial businesses. Fourth, Consortium is a complex encompassing exclusive banking organizations combined together. Fifth, Concern is the most popular form of business group today. Sixth, Conglomerate is the type of business group formed by attracting equity from companies with highest profits via activity of trading in securities on the market. Seventh, Transnational Corporation is an exclusive capital corporation whose production and business activities are on a very large scale that crosses the border of a country. Eighth, Multinational Corporation. Second, pursuant to mode of formation First, Form of Horizontal Linking Is the form in which companies in the same line can link together according to the pre-set objectives to form up business groups. Second, form of lengthwise linking This is the form of linking economic groups lengthwise. Affiliated companies have a link as per technological process with the holding company. Third, Form of Mixed Linking According to this mode, groups often run in a multi-disciplinary and multi-area manner, thus capable of spreading investment capital risks and avoid violation of antitrust laws of governments. 11 Fourth, Form of Voluntary Linking between companies that takes place when companies volunteer to negotiate around a company having great economic potential or holding a key position of the technological line. Fifth, Mode of Compulsory Linking, which takes place in the two following cases: - When a company has a great financial potential (holding company) to take over other companies. - Via the form of company re-organization. Third, pursuant to form of ownership. First, single-proprietary economic groups. Second, multi-proprietary economic groups. Fourth, pursuant to nature of linkage First, economic group is formed according to the rule of “soft linkage” also known as “economic linking” group. Second, economic group is formed on the basis of “hard linking” meaning the member companies are “closely linked in terms of capital”. According to this mode, there are the following popular models: - Model 1: Sample structure. - Model 2: Holding company directly holds shares of affiliated companies not directly under it. - Model 3: Among the counterpart affiliated companies holding one another’s shares. - Model 4: The holding company is an affiliated company of some other companies. 1.1.2.3 The Role Played by Economic Group in the Market Economy First, to attract, accumulative, and expedite capital circulation rate. Second, to transform the socio-economic structure. 12 Third, to apply, develop science and techniques, receive and transfer technology. Fourth, to train and develop human resources. Fifth, to promote economic integration. In Vietnam, this role is displayed in the following: - Via the economic groups, the State have conditions for accumulate and concentrate important resources for the cause of industrialization and modernization. - State corporations serve as a core of the State economic sector - the key sector of the economy. - State corporations are an important factor in transforming economic structure, maintaining high growth rate and stabilizing economy, expanding export, and increasing income for the State Budget. - State corporations generate many jobs; train human resources for the society. - State corporations constitute an important factor in expediting the conversion to the market economy, openness and integration as oriented by the State of Vietnam. Nevertheless, besides the positive role, the formation of State corporations, with their advantages in terms of capital, labour, market, may result in such issues as monopoly, unwholesome competition, price manipulation, tax fraud, environmental destruction…Thus, there should be the State management in order to reduce, stop negative aspects that may arise in the market mechanism… 1.1.3 Theory of the Development of State Management over Corporations 90-91 towards Forming Economic Groups 1.1.3.1 Development of Corporations 90-91 towards Forming Economic Groups is a Necessity and also A Major Policy on Economy in Vietnam. 13 First, this is a policy, guideline in economic renovation of the Party and State of Vietnam. Second, in operation, the Corporations 90-91 have shown their weaknesses in capacity of competitiveness in the home and international markets. Third, possibility to develop the Corporations 90-91 towards forming economic groups is very high. Fourth, that the legal environment is built and completed also create favourable conditions for the inner force development of the member corporations and enterprises. Fifth, the economic environment of Vietnam is fully-fledged for the formation of economic groups. 1.1.3.2 Issues of Concern in order to Ensure the Development of the Corporations 90-91 into economic groups with good results. First, size and scope of capital accumulation. Second, business specialization, cooperation and partnership. Third, exercise of the State’s ownership. Fourth, policy mechanism for development of corporations into economic groups. 1.1.3.3 Conditions for Developing Corporations 90-91 towards Forming Economic Groups First, production must reach a certain level of socialization thus resulting in the object requirement for the choice of organizing an economic group on a large scale and with high concentration on production. Second, the market economy must reach a certain level and some considerably complete market structure must be established. Third, that the considerably sufficient and complete legal documentation shall create the system of regulations and policies relating to the formation and development of economic groups. 14 Fourth, those corporations to be developed into groups must be sizeable enough in terms of capital, including registered capital of the holding company, total registered capital of the corporation, minimum number of member enterprises, legal entity status of the members… Fifth, conditions in terms of human resources, management body, level of science and technology… These are issues that need to be considered when developing Corporations 90-91 towards forming economic groups. 1.2. Grounds for State Management over Corporations 90-91 towards Forming Economic Groups 1.2.1. Conception of State Management over Corporations 90-91 towards Forming Economic Groups State management over Corporations 90-91 towards forming economic groups means that the State will use a combination of tools of law, mechanism of policies, organization of human resources, finance… to influence, adjust activities by Corporations 90-91 in order to create premises, conditions for corporations to develop toward forming economic groups. The relationship between the State and Corporation 90-91 in State management over Corporations 90-91 towards forming economic groups is represented by: + State: Subject of management. + Corporations 90-91: Object of management. + Activities by Corporations 90-91: Object of management. 15 The relation above is represented in the following diagram: Subject of management Object of management Subject of management State management over Corporations 90-91 towards forming economic groups is performed from two angles: - The State manages Corporations 90-91 with the function of administrative management of the State over the types of business. - The State manages Corporations 90-91 as the owner. To exercise the management over Corporations 90-91, apart from the general mode of State administrative management, the State will use the following main modes (represented in the diagram below): First, direct administrative mode. Second, indirect mode via market. The important matter here is that the management will not be loose nor executive order shall be imposed.→ 1.2.2 Rationale for the State management over Corporations 90-91 towards forming economic group. First, proceeding from the inherent role played by the State in the economy in general and in the Corporation 90-91 in particular. Second, proceeding from the role as owner of capital in Corporations 90-91 and strategic intention of building strong economic groups of the State. State Activities by Corporations 90-91 towards forming economic groups 16 Third, through its management over the Corporations 90-91 towards forming economic groups, the State will take the initiative in adjusting operations by economic groups in keeping strictly with the set objectives, at the same time overcome shortcomings and inadequateness that cause obstruction to corporations. Fourth, proceeding from requirements for development of Corporations 90-91. Fifth, proceeding from requirements for fighting against negativity, corruption in the course of developing Corporation 90-91 towards forming economic groups. From all matters above, it can be affirmed that State management over Corporations 90-91 towards forming economic groups is an objective demand according with the State’s strategy in the course of building the modern market economy in the tendency toward international integration. 1.2.3 Requirements of State management over Corporations 90-91 towards forming economic groups First, ensuring the process of developing Corporations 90-91 into economic groups will be prompt, in stable and effective operation. Second, in conformity with the law. Third, the State will not interfere by giving executive orders; expanding the right to self-control; bearing self-responsibility for corporations when these are converted to economic groups. Fourth, publicity First, publicity in advance Second, publicity in arrears Firth, strengthening activities of inspecting, checking, supervising to detect and handle timely and completely offenses in the course of developing Corporations 90-91 to form up economic groups. 17 1.2.4 Contents of State Management over Corporations 90-91 towards Forming Economic Groups 1.2.4.1. Contents of State Management over Enterprises including Corporations 90 – 91 First, building the country socio-economic development strategy of the sector, area, locality on the annual and long-term basis. Second, the State issues a system of legal documents to establish conditions and environment for enterprises including Corporations 90 – 91. Third, the State uses macroeconomic policies for regulating, encouraging supports for enterprises including Corporations 90 – 91. Fourth, stipulating administrative procedure regulation to realize the relationships between and among State management bodies and enterprises including Corporations 90 – 91. Fifth, organizing inspection, check over enterprises including Corporations 90 – 91. 1.2.4.2 Contents of State Management as Owner over Corporations 90-91 towards Forming Economic Groups First, issuing regulations on necessary conditions, criteria for permitting Corporations 90 – 91 to develop into economic groups. Second, stipulating administrative procedures for Corporations 90 – 91 to realize when converting to economic groups. Third, appraising, approving schemes for converting of each Corporation. Fourth, carrying out provision of initial capital, assets for Corporations after converting. Fifth, appointing representatives of the State to take direct control over enterprises within economic groups. Sixth, approving financial mechanism of economic groups. 18 1.3. Foreign Experiences regarding State Management over Corporations and Economic Groups and the Issues that can be Drawn for Research of Vietnam 1.3.1. Foreign Experiences 1.3.1.1. South Korea 1.3.1.2 Japan 1.3.1.3 Indonesia. 1.3.1.4 Malaysia 1.3.1.5 China 1.3.2. Issues that can be Drawn for Research of Vietnam First, economic group is the form of corporate widely applicable to developing countries. Second, economic groups often take in member entities as per objective programs of the State. Third, economic groups are set up to create key economic sectors including export. Fourth, economic groups take hold of sections, phases that will determine the success or failure of the country economic development objectives. Fifth, very flexible internal management mechanism. Six, the State relies on economic groups to control the national economy. CHAPTER 2 REAL STATUS OF STATE MANAGEMENT OVER CORPORATIONS 90-91 TOWARDS FORMING ECONOMIC GROUPS 2.1. Generalization of Corporations 90-91 and Process of Developing into Economic Groups in Vietnam 2.1.1. Formation and Operations of Corporations 90-91 Pursuant to Decisions No. 90 and 91/TTg dated March 7, 1994 by the Government, Corporations 90 and 91 were formed on the basis of re-organizing and restructuring State-owned enterprises. These are State Corporations. 19 Corporations 90-91 encompass financially independent entities; financially dependent entities; non-productive entities. Member entities of Corporations have their own seal, are permitted to open their own bank accounts in conformity with method of payment by Corporations. Financially independent entities have their own Charter approved by Board of Directors of Corporation under provisions of Business Law and Regulations on State Corporations. Financial regimes and economic accounting of Corporations conform to the Government’s regulations. By the end of February 2008, throughout the country, there were 94 State economic groups, corporations (07 economic groups and 87 corporations of the State). The State capital in 19 economic groups, corporations of special grade accounted for 84% of the total of State capital in 94 economic groups, corporations of the State. The State capital in 2008 increased by 13% compared with that of 2007, which mainly came from after-tax profits, re-assessment of assets in the process of restructuring, converting and capital surplus from amortization of member entities. Table 2.1: Norms of Operation by Groups, Corporations Norms 2008 Compared with 2007 1. Total State Capital (VND thousand billion) 440 + 13% 2. Total Turnover (VND thousand billion) 1.044 + 30,7% 3. Total Profit before Tax (VND thousand billion) 125 + 76% 4. Rate of Return (3)/(1) 28% 5. Total Payment to the State Budget (VND thousand billion) 182 + 34% 6. Total Investment Capital (VND thousand billion) 177 - 5% - Including in the areas of securities, insurance, banking, real estate, investment funds (VND thousand billion) 7.2 - 26% Today, State enterprises contributions make up approx. 40% of GDP, generating 39.5% of industrial output, over 50% export value and 28.8% of total 20 domestic income (excluding collection from crude oil and import tax), creating jobs for 1.1 labourers with an income of VND 3.5 - 4.5 mil/person/month. Besides the results obtained from their activities, State corporations also reveal lots of inadequateness in accumulating, concentrating capital by corporations in management organization, in the relationship among the entities of corporations. One thing of great importance is that the level of accumulating and concentrating capital by corporations is still low thereby reducing their competitiveness, particularly when Vietnam joins the WTO. 2.1.2. Process of Formation of Economic Groups according to the Holding- Affiliate Company Model from Corporations 90-91 2.1.2.1. Models of Pilot Economic Groups in Vietnam First, Corporation according to the Holding-Affiliate Company Model with the holding Company being a State one. + Holding Company is a State company. + Affiliated companies are companies with governing equity from Holding Company. + Holding Company may have affiliated companies being the ones without governing equity from Holding Company. + Holding Company has functions for directly involving in operation and investing finance in other enterprises or merely investing finance in other enterprises. Second, Holding Company is a one-member company limited - Holding Company: Holding Company has functions for directly involving in operation and investing finance in other enterprises or merely investing finance in other enterprises. - Affiliated Company: Affiliated Companies are the companies which meet one of the following conditions: 21 + 100% of their chattered capital is held by Holding Company. + Shares, governing equity (over 50% of chartered capital or total number of common shares issued of the company) is held by Holding Company. + The majority or all members of Board of Directors, General Director (Director) of the company is directly or indirectly appointed by the Holding Company. + Charter of the company is decided to be amended, supplemented by the Holding Company. Pursuant to Business Law 2005, Economic Group is one of the forms of combining the companies having long-term ties to one another on the aspects of economic, technical, market benefits and other operations. 2.1.2.2. Process of Forming Some Pilot Economic Groups from Corporations 90-91 a. The formation of economic groups is the result of the process of restructuring and renovation of State Corporations. On the ground of selecting among the Corporations 91, during 2005 – 2006, the Prime Minister decided to approve the scheme for converting 7 Corporations 91 to operation according to the model of economic groups, in which many affiliates are joint-stock or associated companies. The Prime Minister also promulgated exceptional documents for adjusting every pilot ethnic group. These included Decisions by the Prime Minister approving scheme for setting up State economic groups; setting up holding company of group; appointing members of Board of Directors of Holding Company. b. Steps for setting up pilot economic groups Piloting encompasses 4 steps:
Selecting enterprises to be converted;
Approving scheme for conversion (Prime Minister decides after considering proposals by ministries of: Planning and Investment, Finance, Internal Affairs, Labour – War Invalids and Social Affairs, the ministry 22 that govern line of business run by corporation and conclusion by Standing Committee of the Government).
Approving Regulations on Organization and Operation of Holding Company (by the Prime Minister).
Approving Regulations on financial management of Holding Company. State Economic Groups established: + PetroVietNam; + Vietnam Electricity (EVN); + Vietnam Coal and Minerals Group (Vinacomin); + Vietnam Ship Building Industry Group (VinaShin); + Financial – Insurance Group (Bao Viet); + Vietnam Post and Telecommunications Group (VNPT); + Textile and Garment Group (Vinatex); + Rubber Group (VRG); + Real Estate Investment and Business Group; + Vietnam Industry and Construction Group; + Vietnam Housing and Urban Development Group; + Vietnam Chemical Industry Group; Capital for these economic groups is mainly from the State. Their operations basically conform to the former modes. The management mechanism of Holding Company encompasses: + Board of Directors; + Monitoring Committee; + General Director and Deputy General Directors; + Chief Accountant; + Assistant Apparatus. Members of group (affiliated companies) comprise: 23 + Companies with 100% of chartered capital held by Holding Company; + Companies with more than 50% of chartered capital held by Holding Company; + Companies with less than 50% of chartered capital held by Holding Company; + Non-productive entities: c. Production and business results of economic groups 2.1.3. Assessing Pilot Conversion of Corporations 90-91 to Economic Groups 2.1.3.1. Results obtained First, increase in owner’s capital. Second, economic groups have expanded their range of operation, not only concentrating investment on the domestic but also initally on the froreign markets. Third, formation of the multi-owership structure among economic groups. Fourth, State economic groups together with corporations continue maitaining their decive role, ensuring the supply of necessary materials, goods, services for the eonomy, creating substantial sources of income to the State budeget, contributing to eonomic growth and maintaining macro regulation of the State. Fifth, economic groups have participated well in charitable activities, thus contributing to ensuring social security. 2.1.3.2. Restrictions First, size of capital owned by groups is still too small compared with requirements for development and integration. Second, operational efficiency of economic groups does not correspond with the resources invested, many objectives set for groups have not been achieved. Third, the model of organizing management for economic groups has not yet been clearly determined. Fourth, the model of organizing production and business, mechanism for managing internal affairs of economic groups have not yet been clearly determined. 24 2.1.3.3. Causes - The mechanism for management of the holding company has been used by economic groups as duty and function for managing the groups. - Mechanism for personnel management, assignment, decentralized administration, salary, bonus management; clear-cut distinction between State management and State capital management as to economic groups. - Management in economic groups is still heavily influenced by the former State management mechanism. - There is no clear-cut distinction between the function for State administrative management from the function for State owner management as to economic groups. - Officers’ management level cannot meet new management requirements. These are issues that need to be renovated by completing State management over economic groups. 2.2. Real Status of State Management over Coporations 90-91 towards Forming Economic Groups 2.2.1. Promulgation of legal documentation system relating to Corporations 90-91 and economic groups converted from Corporations 90-91. The State promulgates legal documents regulating operations by enterprises, including Corporations 90 – 91 and economic groups. According to the aforesaid legal documents, the State’s mechanism for financial management as to State corporations has the following main contents: - Corporations carry out the rule of business accounting, using income to cover expenses, at the same time, have to carry out the task of serving for the State. - The State step by step implement “softening” the input price mechanism. - The States allocates capital to corporations for managing and using. - Corporations are permitted to retain fixed asset fundamental depreciation for re-investing and renovating machines and equipment. 25 - Corporations are permitted to mobilize capital in various forms. Apart from the capital appropriated from the State Budget, are entitled to take the initiative in borrowing banks, other businesses, individuals inside and outside corporations in local and foreign currencies to serve operation. - The State encourages corporations as well as other State-owned enterprises to accumulate, concentrate their production and business capital through policy on State tax collection (and after that the taxation system unanimously applicable to enterprises) and policy on setting up and use enterprise funds. - Through policies on salary and wages, regimes of deducting from operating profit for bonuses, the State creates material motive to attach employees closely to the enterprise, to attach employees’ benefits to the enterprise’s operating results. 2.2.2. Managing Process of Developing Corporations 90-91 into Holding Company-Affiliated Company Economic Groups First, the State stipulates necessary and compulsory conditions, standards for corporations 90-91 to be converted to holding company-affiliated company economic groups. Second, it is stipulated that State corporations to be converted to economic groups have to work out their plan for conversion, plan for post-conversion production and business… Third, specific regulations on establishing holding company and affilitated companies as members of economic groups. Fourth, stipulations on financial management over economic groups developed from State corporations. Fifth, stipulations on production and business activities of economic groups. Six task assignment between the Government and Ministries, Sectors implementing State management of Corporations 90-91. 2.2.3. Real Status of State Management over Personnel for Corporations 90-91 towards Forming Economic Groups First, for economic groups set up from restructuring State Corporations. 26 - Prime Minister appoint members of Board of Directors of economic groups at the request by Ministers, Ministries in charge of economic groups. - For economic groups converted from Corporations 91, Prime Minister appoint President of Board of Directors and General Director at the request by Ministry in charge. Appointment, dissmisal of leaders, managers of economic groups must be appraised by Ministry of Internal Affairs. Second, for economic groups set up on the basis of merging some independent enterprises. - Chairmand of People’s Committees, sections directly under the Central Government appoint members of Board of Directors, President of Board of Directors, Managing General Director. - Board of Directors appoints Monitoring Committee in which Head of the Committee is a member of Board of Directors. - Board of Directors appoints Deputy General Directors and Chief Accountant at the request by General Director and with approval of the governing body. Third, for other managers (at Department, Division… levels) of economic groups are appointed by General Director after begin approved by Board of Directors. Second, for leaders in affiliated companies. 2.2.4. Management Organization within Corporations 90-91 First, relationship between Board of Directors and General Director in management. Second, relationship among the member entities. 2.2.5. Inspection, Supervision Inspection activities in this field is conducted in the following forms: - Inspection is conducted when in Corporations, economic groups there occurs any negative matter. - Inspection, supervision over process of assessing assets, handling labour… when the companies implement business amortization in preparation for developing into economic groups. - Periodical inspection. 27 - Activities of inspection, supervision of corporations, economic groups in recent time have achieved certain results, some negative, corruptive phenomena, which resulted in loss of the State assets, have been revealed, thus recovering thousands of billion dong for the State. Besides inspection, the State also uses audit as a tool for controlling operations of corporations and economic groups. 2.3. Assessing Real Status of State Management over Corporations 90-91 toward Forming Economic Groups and Problems need to be solved 2.3.1. Results Obtained First, the State has devised long-term, particularly 5-year, strategies, plans for socio-economic development of the country and of each sector as well. Second, a comprehensive legal system has been formed to create legal environment for corporations as well as economic groups to operate and develop. Third, sense for self-control, self-responsibility of economic groups in production and business, especially finance, have been further created and expanded. Fourth, State governing bodies, from the Governmental, Ministrial, sectorial down to the local levels, have coherently, specifically coordinated in implementing State management over Corporations 90-91 toward forming economic groups. Fifth, a number of inadequate State policies on the management of corporations have been improved thus creating more transparences for operations of economic groups after being formed. Sixth, policies on labour, employment placement and regimes for employees enable employees to rest assure and stabilize their lives when corporations convert to economic groups. 2.3.2. Restrictions First, the State, especially long-term, strategies, plans for socio-economic development ares till general, not specific; in the relations between and among the sectors, localities, there still exist inconsistent points. 28 Second, the system of legal documents, policy mechanism issued by the State is fairly complete and comprehensive,but is still burdened with administrative imposition, thereby reducing the positiveness and creativeness of corporations as well as economic groups in ther operations. First, economic groups, while established, still characterized by putting, on the administrative aspect, businesses together. Second, the role, responsibility of mangers in economic groups are not clear. Third, restricted ability to accumulate and concentrate capital in economic groups to carry out general strategy. Third, the right to self-control in terms of finance of holding company and affiliated companies as members has not yet brought into full play. Fourth, activites of inspecting, supervising, particularly on the financial respect, are not clear, lacking specific criteria for assessment. Fifth, the personnel work of Corporations 90 – 91 as well as of economic groups is still imbued with administrativeness, having not yet sastified the requirements for operating management in the market economy during integration. The very basic weaknesses above have considerably reduced operating performance of economic groups as well as member companies, thus causing big obstruction to businesses in the course of international integration. 2.3.3. Pressing Issues that Need to be Solved First, reduce toward annul those regulations imbued with administrative imposition in the process of converting corporations 90 – 91 to economic groups and regulations on the organization and operation of economic groups as well. Second, the issue of creating specific conditions for economic groups to accumulate, concentrate capital and strengthen financial capacity. Third, the issue of self-control of economic groups. Fourth, the issued of managers of economic groups. Fifth, the issue of legal grounds for relationship between holding company and affiliated companies, as well as that among affiliated companies. 29 CHAPTER 3 ORIENTATION AND SYSTEM OF SOLUTIONS FOR COMPLETING STATE MANAGEMENT OVER CORPORATIONS 90-91 TOWARD FORMING ECONOMIC GROUPS IN VIETNAM 3.1. Orientation 3.1.1. Orientation for the Socio-Economic Development of Vietnam till 2020 First, continue completing the institution of socialist-oriented market economy. Second, speed up industrialization, modernization in association with intellectual eonomy development and environmental protection; through proper forms of investment to improve competitiveness of commodities originated from Vietnam and set up sectors, areas that support economic development. Third, improve quality, performance of education and training, science and technology, human resources development. Fourth, exercise social equality right at each step, each development policy. Fifth, develop culture, the spritual background of society. Sixth, expand foreign relations, take the initiative and active part in internation integration so as to create conditions for living in peace for the country’s socio- economic development and security and defence maintenance. Seventh, bring democratism into play, continue building and completing the socialist jurisdiction State. Eighth, the task and goal of Vietnam’s socio-economic development till 2010 are Strive to obtain a drastic, with high quality and more sustainable, economic growth rate, in association with human development. By 2010, GDP will increase by over 2.1 times compared with that of 2000. (Document of the 10th Nationwide Delegates’ Congress, National Political Publishing House, 2006, p. 76). 30 3.1.2. Impact of the World and Vietnam’ Backgrounds on the Renovation of the State Management over Corporations 90-91 toward Forming Economic Groups. First, globalization continues its dratic development with new features. Second, the drastic development of science-technology gives an impulse to the world economy to shift rapidly to the time of developing intellectual economy, international labour assignment in the form of global “value chain”. Third, the world economy continues adjusting toward gradually shifting to a more multi-polar economy. Fourth, to expand drastic investment to the ouside of the newly emerging economies constitues a new tendency of international investment. Fifth, the issues imposed for the businesses of Vietnam, including corporations and economic groups of Vietnam. 3.1.3. Orientation of Renovation of State Management over Corporations 90-91 toward Forming Economic Groups in Vietnam First, speed up the process of developing Corporations 90-91 into economic groups at the same time develop strong economic groups operating according to the model of holding company-affiliated company (general model). Second, create conditions for economic groups to accumulated, concentrate capital, resources, particularly holding company, to grarantee the holding company will grow strong to invest in affiliated companies so as to govern the key lines, sectors of the economy. Third, expand the right to self-control, self-responsibility of holding company, affiliated companies throughout the economic group on the aspect of business operation. Fourth, strengthen the role played by the State in inspecting, supervising businesses. Fifth, create an environoment of equality, antitrust for corporations, economic groups. 31 Sixth, inherit the positive aspects of current management mechanism, at the same time, step by step apply international standards and practices conformable to the conditions of Vietnam. 3.2. System of Solution for Completing State Management over Corporations 90 – 91 towards Forming Economic Groups 3.2.1. Group of Solutions for Completing Legal Background First, complete the legal environment, create conditions for Corporations 90- 91 to husband resources for development. Second, complete the legal environment, create conditions for the process of developing Corporations 90-91 into economic groups. Third, synchronize, concretize legal environment for economic groups operate and develop. 3.2.2. Group of Solutions for Renovating Some Macro Managing Tools of the State 3.2.2.1. Renovating Some Contents of Mechanism for Financial Management of Economic Groups First, construct and operate proper financial institutions, efficiently serve economic groups in mobilizing and using investment capital in an effective manner. Second, set up financial company within the economic group, create conditions for entities to participate in financial market, particularly the capital market. Third, replace the administrative mechanism for allocating capital with meachanism for investing finance in affiliated companies of the holding companh. Fourth, complete policies to make it possible for companies to make full use of every possibility to attract, raise funds to serve production and business. Fifth, renovate the mechanism for controlling finance of economic groups. 32 3.2.2.2. Completing and Issuing Policies Relating to the Development and Operation of Corporations 90 – 91 toward Forming Economic Groups First, complete policies on encouraging corporations 90 – 91 to develop into economic groups Second, have policies and conditions for economic groups to bring into the fullest play their capacities in competition on the market. Third, renovate policies relating to infrastructure for economic groups to operate in a convenient and effective way. Fourth, the State should pay special attention to policies on eological environment and information... 3.2.2.3. Completing Policies on Money, Exchange Rates, Froreign Currency Management... 3.2.3. Renovating Activities of Selecting, Appointing Officers Acting on behalf of the State (Owner) to Take Direct Management over Economic Groups First, replace the mode of selecting via nominating with competitive examination for officers in the post of President of Board of Directors, General Director, Chief Accountant of economic groups as well as companies in which State capital accounts for the governing rate (> 50%). Second, carry out appointment according to an open, democratic mechanism as to other management titles in economic groups such as Member of Board of Directors, Deputy General Directors, Head of Monitoring Committee... Third, as to managers of Departments, Divisions, Professional Committee, workshops. In order to improve operating performance of economic groups and of affiliated companies as well, such titles shall be decided by General Director after adopted by Board of Directors. Fourth, renovate preferential treatment policies for officers managing State capital in economic groups. Fifth, carry out re-training on a regular basis officers managing State capital in economic groups. 33 3.2.4. Completing the Relationship between Holding Company and Affiliated Company and Non-productive Enties within Economic Groups First, with regard to relationship between the Holding Company and the affliliated companies in which the Holding Company holds 100% of chartered capital. Here, the Holding Company plays the role as owner of affiliated companies, accordingly, the relationship is renovated as per the following contents: First, an affiliated company is an economically independent entity, with full legal entity status, to exercise the civil rights and obligations under provisions of the law. Second, the Holding Company has responsibility to provide full chartered capital for affiliated companies within a term as designated in financil regulations of affiliated companies. Third, investment projects of affiliated companies equal to or exceed 50% of the total assets as recorded in account books of affiliated companies shall be approved by Board of Directors at the request of affiliated companies. Fourth, the Holding Company is entitled to guarantee affiliated companies to borrow loans. Fifth, affiliated companies have responsibility to strictly and fully comply with laws on accounting, statistics, coporate auding policy. Second, with regard to the relationship between the Holding Company and affiliated company that has part of the Hodling Company’s equity. First, depending on the rate of contribution, the Holding Company may appoint someone to directly manage the capital contributed to the affiliated company, exercise the rights and obligations of sharehoders to the affiliated company. Second, if the Holding Company wishes to draw the capital it has invested in the affiliated company, it must comply with charter of the affiliated company. 34 Third, use of the divided dividends or profit for increasing investment capital in the affiliated company shall be decided by Board of Directors of the Holding Company. Third, with regard to the relation between the Holding Company and its subordinate entities. Subordinate entities of the Holding Company carry out the tasks assigned by the Holding Company. Fourth, relationship among affiliated companies. Affiliated companies in economic groups are independent businesses, equal to one another in every area. 3.2.5. Renovating Administrative Procedures in State Management over Corporations 90 – 91 toward Forming Economic Groups The following tasks shoud be done: - Assigning among State managing bodies so as to determine points of transactions, setlement of work relating to corporations and economic groups, under the “one-door” rule. I.e. the administrative procedures shall be handled by only one State managing body. - Make a sample administrative procedure set for corporations and economic groups. - Specify time for processing and handling. - Announce the administrative procedure set along with regulations on businesses including corporations, economic groups so that they would know and follow. 3.2.6. Strengthening Activities of Training, Re-Training Officers of Corporations, Economic Groups First, as to State officers managing over corporations and economic groups. First, classify State officer managing over corporations and economic groups according to the title held. 35 Second, form up requirements for knowledge, skills that need to be train for each kind of title. Third, work out resfresher course program and time for each kind of title. Fourth, organize refresher course under the program. In our opinion, working out program and organizing refresher course should be assigned to Academy of Public Administration under National Academy of Public Administration. Second, as to officers directly managing operating activities of corporations and economic groups. - Classify the number of such officers as per the job titles they are holding. - Work out resfresher course program and time for each kind of title. - Organzing refresher courses may be carried out in different modes: + In intensive manner at refresher course centers of Ministries, sectors, localities. + At corporations, economic groups. In this mode, corporations, economic groups can put forward refresher course requirements, organize and convene trainees, invite experts in the related fields to act as trainers. - Specify time and number of special subjects involved in training so as to issue certificates to officers attending the courses. - It should be clearly specified that certificates shall be issued only to those officers who have attended the necessary number of special subjects and time attending within a year, for example, 5 special subjects and for 15 days or more. - Certificates issued by President of Board of Directors of corporations, economic groups, basing on results of each refresher course in which the trainee has participated. 36 3.3. Conditions for Expediting Completion of State Management over Corporations 90-91 toward Forming Economic Groups First, renew the awareness of corporations 90 – 91 as well as economic groups in the socialist-oriented market economy in the tendency toward integration in Vietnam. First, corporations and economic groups according to the model of Holding Company - Affiliated Company is a form of advanced, up-to-date business toward integration of the present time. Second, the formation and development of corporations and economic groups according to the model of Holding Company - Affiliated Company have resulted in the shift from the mode of owning State businesses to the mode of owing capital invested in businesses. Third, State managing bodies shall not interfere deeply in the production and business of corporations, economic groups as well as affiliated companies, but only concentrate on State management. Second, carry out in sync all solutions on the basis of concentrating, stressing every specific solution within a certain time and in every cocrete corporation, economic group. Third, consolidate, strengthen the bodies in charge of exercising State ownership over State corporations, economic groups. Fourth, strengthen activities of inspecting, supervising of the State as owner of State corporations and economic groups. Fifth, there should be sanctions as regards personal responsibilities of financial managers in both State bodies and businesses in economic groups. 37 CONCLUSION Renovation of State management over Corporations 90 – 91 toward forming economic groups is something of a novelty in Vietnam. Great importance is being attached by the State to this issue in an effort to build economic groups strong enough with potential for competition on demestic and international markets in the tendecy towards integration. Through a paintaking research with personal experiences gained in many years working as a manager State corporations, the thesis can meet the scientific objectives, requirements for a doctoral thesis on public administrative management. Accordingly, the main scientific results of the the thesis are represented throught the following: First, systemization with development and completion scientific grounds of State management over corporations 90 – 91 toward forming economic groups. Second, systematic, specific and scientific analysis, assessment of real situation of operations of corporations 90 – 91, State economic groups and State management over corporations 90 – 91 toward forming economic groups. Third, based on guidelines on renovation of the Party and State, social- economic development strategy till 2020, current international and domestic contexts, the thesis proposes orientations, system of solutions, and conditions for carrying out and completing State management over corporations 90 – 91 toward forming economic groups. State management over corporations 90 – 91 toward forming economic groups is a major issue relating to various sectors, branches, State managing bodies at different levels, businesses, and labourers, and a major issue to Vietam, too. The results of the thesis, however, can meet the scientific requirements for a doctoral thesis on public administrative management. It has certain contributions to theory of State management on the economic aspect. Particularly, the thesis research results have practical values contributing to the process of renovating, building, making plans for management of eonomic groups. 38 The thesis constitutes a beneficial document to teaching, studying, researching, particularly, it serves as a valuable reference for pratical policy-makers. As a doctoral thesis on public administrative management, though under a labourious and dutiful research, the thesis surely cannot avoid making shortcomings. We would highly appreciate any sympathy and excuse for such shortcomings of the thesis. 39 WORKS BY THE AUTHOR RELATING TO THE THESIS SUBJECT THAT HAVE BEEN PUBLISHED 1. Le Hong Tinh, “Some Issues in Implementing Pilot Economic Groups in Vietnam”, printed on Propaganda and Training Magazine No. 3/2010, released in March 2010. 2. Le Hong Tinh, “Internationa Experiences in Developing Economic Groups and Lessons for Vietnam” , printed on Economic Management Magazine No. 31, released in April 2010. 3. Le Hong Tinh, “Completing State Management over Corporations 90-91 towards Forming Economic Groups”, printed on Economic Management Magazine No. 36, released in October 2010.