Breakthrough made in TPP negotiations on Vietnamese SOEs

Breakthrough made in TPP negotiations on Vietnamese SOEs

Solutions have been found in the issues relating to the Vietnamese state owned enterprises (SOEs), one of the toughest topics in the negotiations for TPP.

The immutable principle of TPP is to push up the trade liberalization and fair competition among enterprises, with no discrimination for private, foreign invested or domestic enterprises.

There must be any preferential or discriminatory treatment for any enterprises, including SOEs. Therefore, the agreement will comprise a chapter about SOEs.

There is no requirement on the maximum percentage of SOEs in the national economies or something like that. The only requirement is the existence of the transparency and equal treatment which can bring opportunities to all forms of enterprises.

Any enterprises which see the discriminatory treatment will have the right to bring the cases to the legal institutions in their countries or other reasonable regimes.

According to Le Xuan Nghia, Head of the Institute for Business Development, a well-known economist, the TPP agreement draft requires SOEs to be absolutely transparent with the budgets. SOEs’ transactions and finance situation must be made public and transparent.

Nghia commented on Hai Quan newspaper that it is really a difficult for Vietnamese SOEs to implement the financial disclosure, and it is even more difficult to make transactions, i.e. all the buy or purchase deals, contract signing or negotiations, transparent.

Also according to Nghia, “absolute transparency” is the word used in the latest draft version of the TPP agreement.

Le Danh Doanh, a well-known economist, said in developed countries, SOEs just amount to a very proportion in the national economies, about less than 10 percent.

Meanwhile, in Vietnam, SOEs make up 28 percent of GDP, and if counting on the five state invested banks, the figure would be 34 percent of GDP. There is no other market economy in the world where SOEs account for such a big proportion like in Vietnam.

SOEs use 70 percent of the total investment capital in the society, 50 percent of the state’s investments, 60 percent of bank loans and generate more than 50 percent of bad debts.

Doanh, citing international sources, has said that the involved parties have reached a consensus on the issues relating to SOEs. The US, Canada, Japan, Australia and Mexico have agreed to give the grace period of five years to the other four – Malaysia, Peru, Brunei and Vietnam – to adjust their policies on SOEs.

This means that the four countries would have more time to adjust themselves and would not have to implement the strict requirements right after the agreement is signed.

Of the four countries, Vietnam is the country with the income lower by far, which has been shifting from the centrally planned into a market economy and carrying reforms.

Meanwhile, Malaysia has problems with Bumiputra, or the policy which gives preferences to Malaysian people which has been the topic of argument in the country.

Commenting about the five-year grace period initiative, Doanh said it can lead to acceptable ways and it absolutely comes in line with Vietnam’s determination to push up the SOE reform.

Nghia thinks that once SOEs are forced to make public their financial situation and transactions, some of them would rather leave the state owned economic sector, because they don’t like the transparency.

However, Nghia does not think this would be a big problem, because transparency is what Vietnam is striving for.

vietnamnet