This paper takes the government’s statement that equitisation is not always privatisation as a starting point to explore the history of state-owned enterprise (SOE) reform. In the 1980s and early 1990s the Government of Viet Nam framed a variegated strategy for state enterprises. The asset stripping and de facto decentralisation of the central planning period left the central government in a tenuous position in relation to its ownership and control of SOEs. Leakage of capital severely drained state resources to the detriment of macroeconomic stability. In response, the state began redefining its role in the economy. While gradually moving away from central planning, the state has made clear its intention to remain involved in the economy even as it enlarged the space for private sector activity. This has involved a shift away from the direct management of state assets to a focus on managing investment. Emphasis has shifted to preventing losses of state capital and transforming SOEs into firms operating under the Enterprise Law.

SOE reform has followed two distinct trajectories. Most of the loss making state enterprises that drained state resources and contributed little to state budget revenues were smaller SOEs attached to departments of line ministries or lower levels of government over which the central government had little control. The transformation of smaller SOEs was an attempt to improve economic performance and also a means through which the central government could break the power of lower levels of government that had used smaller SOEs as tools for asset stripping and rent distribution. This process resembles privatisation programmes in other countries.

However, the government emphasises that the state will continue to play a leading role in the economy. Large SOEs are an important source of state budget revenues and provide the means through which the government can implement state plans and policies following the end of central planning. Larger state enterprises have been regrouped into General Corporations (GCs). Strategic sectors have been selected, listing areas of the economy in which the state will retain control. The criteria for keeping control of firms in these sectors are based on state investment levels and firm size. In addition, regulations for restructuring GCs have been issued. While stressing the need for transformation of SOEs into firms operating under the Enterprise Law, these documents also detail the investment-based mechanisms of influence for the state and General Corporations.

A team of UNDP and Viet Nam Academy of Social Sciences (VASS) researchers surveyed seventeen firms in Hai Phong in August and October 2005. Interviews were also conducted with officials from the Hai Phong Department of Planning and Investment (DPI) and the Hai Phong Department of Finance (DoF).

The interviews suggested that the state has three main concerns. First, state capital must remain intact. Second, GCs must meet targets and objectives set by the state. For many firms, these targets are simply growth targets. Third, GCs must develop certain key industries, with shipbuilding being the primary example among surveyed firms. The development of targets and objectives involves a high degree of consultation between GCs, member firms and supervising agencies. Growth targets are typically an outcome of member firm capacity and projected income. Firms are not required to meet their targets by operating solely in their registered business areas, as member companies are able to move into related or unrelated areas.

These interviews provide initial confirmation of the contours of reform outlined in SOE reform documents. The state will retain sole ownership or a majority capital share in firms in strategic sectors, exercising its influence according to the rules that govern all shareholders. Although transformed strategic SOEs and GCs will be governed by the rules of the private sector, their majority shareholder will not follow the same motivation as a non-state majority owner. Transformation of larger strategic state enterprises needs to be understood in this context.