Ministry warns sluggish State-owned enterprises

The Ministry of Finance has said it will draw up a list of inefficient and loss-making public firms every year for intensive monitoring, warning firms that continue to languish will be sold or dissolved.

This scheme is part of a circular the ministry issued recently to flesh out a new Government policy on oversight of loss-making State-owned enterprises (SOEs).

It states the ministry shall complete the list before May 30 every year, with the companies on it coming under the close scrutiny of the ministry’s agencies.

SOEs will make the list if they make losses for two consecutive years or make a loss for one year and see 30% of their capital eroded.

Firms that are unable to repay 0.5% of their debts annually will also be on the list.

The SOEs will then have to submit comprehensive quarterly and annual financial reports. These will include reports on their production and business targets, turnover, costs, profits, return on capital and equity provided by the State, debts and debt repayment capacity.

The ministry’s agencies will then pore over these reports together with the companies.

In and out

Firms will be taken off the list when they don’t make losses for two consecutive years.

On the other hand, if they remain unprofitable for two years after appearing in the list, they will be sold, dissolved or declared bankrupt.

The circular exempts SOEs in the finance, banking, insurance, and securities sectors from this scheme.

According to the ministry, by December 2007 there were around 1,500 SOEs involved in production and trading, 600 of which failed to make a profit. (VNS)