After-Transfer Concerns at CMSC

In a discussion with SGGP Investment & Finance, Deputy Professor Dr. Dinh Trong Thinh (photo), Head of International Financial Management course at Academy of Finance, said, “There is need to clarify the roles of Commission for the Management of Stake Capital-CMSC and other ministries and sectors related to State Owned Enterprises-SOEs”.

JOURNALIST: - The transfer of SOEs to CMSC is completed, so what do you think about this transfer and how is it being done so far?
Dr. DINH NGOC THINH: - So far, 19 corporations have been transferred to CMSC. However, capital management and the capital using mechanism are still our concerns. It is required to increase both the enterprises’ proactivity and legal enforcement. We could say, the first step of transferring enterprises to CMSC has been smooth.  
However, we have to be more careful about the ‘after-transfer’ consequences. Many projects and plans of corporations have been delayed, suspended, and restructured during the transfer process. Some other projects are at risk of termination and stopping of funding. These projects, after transfer to CMSC, should be classified, analyzed, and evaluated as per a suitable management method. 
 CMSC should build a mechanism to cooperate with ministries and concerned sectors at the earliest. It should differentiate the role, functions and obligations of each party, shorten administrative time and avoid creating difficulties for enterprises.
Firstly, it is necessary to evaluate the value of projects, determine the total capital needed and calculate the value of enterprises which undertake these projects. It is important because the true value of enterprises may be far below their book value.
If the transferred enterprises are loss making, this will be a mess for CMSC. It also wastes time and creates difficulties for the agency.
- Some people say that the classification of these 19 corporations will be the most difficult for CMSC. What do you think about this?
- I think, after evaluation, we should classify the corporations into different groups, especially the enterprises which have some loss making projects.
The first group should be enterprises which have completed the privatization process, own completed projects and deliver above-average level of technology. We should restructure these corporations to reduce their input cost like labor, material and improve their effectiveness, operation capability and profitability.
The second group should include enterprises which are operating completed projects. These enterprises have below-average level of technology but are able to make high profit. We should have different management treatment for these corporations, push up the privatization process or restructure the projects of such corporations.
After-Transfer Concerns at CMSC ảnh 1 Đình Vũ silk factory, one of 12 loss projects of the Ministry of Industry and Trade. 
The third group should be enterprises which have pending projects. The more we invest into these projects, the more we lose. These corporations, after transfer to CMSC, will fall into the status of “regret to throw away but painful to hold on”. If we cannot privatize these companies, we should let them go bankrupt.
- Enterprises also face many difficulties after they are transferred to CMSC because of complex and multiple-layer management. Some projects are delayed given the incapability of CMSC in evaluating and appraising the projects. Is this true?
-The key point here is to clarify the role of parties. Based on the defined mechanism, CMSC is established to act on behalf of government to manage the government capital in enterprises. 
However, the enterprises’ management is also dependent on the type of ministries and sectors. For example, the General Department of Chemical is the only legible department to evaluate and appraise a chemical project or Ministry of Transportation is the only legible ministry to evaluate and appraise a transport facility project.
- In your opinion, how to resolve the obstacles in the current mechanism?
- I think the key point here is we lack the clarification of responsibility of each party. This is time consuming, causes project delays and impacts the enterprises’ profitability.
The enterprises should suggest to the government to differentiate the roles of CMSC with the ministries and other concerned sectors. It also needs to create a mechanism for collaboration between all the parties.
- Thank you very much.

Luu Thuy

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