PHNOM
PENH—Vietnam Prime Minister Nguyen Tan
Dung said he is stepping up plans to revamp the Communist-led country's bloated
state sector that have led to a series of debilitating credit-rating downgrades
and pressured Vietnam's fragile currency.
In
written responses to questions posed by The Wall Street Journal on the
sidelines of a regional summit in Cambodia, Mr. Dung said he plans to push
Vietnam's state-owned enterprises into closer competition with the private
sector to make them more efficient, and to revive a stalled series of partial
privatizations, a process known in Vietnam as "equitization."
Creating
a more level playing field between the private and state sectors, Mr. Dung
said, "is one of the key components of economic restructuring."
Vietnam's
once-booming economy has foundered in recent years, thrown off balance in part
by burgeoning debts at some of its sprawling state-owned enterprises.
Mr.
Dung's government previously had adopted a policy of encouraging Vietnam's big
state-owned firms—which control about 40% of the country's economic output—to
diversify into new industries and provide a powerful counterweight to a deluge
of foreign investment into the nation.
The
strategy in many cases backfired. In some instances, state-owned enterprises
took on unmanageable levels of debt or invested in businesses that they didn't
fully understand. Shipbuilder Vinashin, for instance, nearly collapsed under
$4.4 billion in debts in the summer of 2010 and later defaulted on some of its
foreign obligations after moving into businesses as diverse as brewing and
tourist resorts.
That
debacle forced Mr. Dung, a 62-year-old former security chief who was appointed
Vietnam's top day-to-day executive in 2006, to acknowledge his mistakes in a
televised apology to the Vietnam's parliament. One lawmaker demanded an
unprecedented vote of no confidence, while Mr. Dung narrowly survived a
behind-the-scenes leadership challenge at the Communist Party Congress in Hanoi
in early 2011.
The
Vinashin crisis also ushered in a rethink of Vietnam and its state-dominated
economy among investors.
International
credit ratings firms such as Fitch Ratings, Standard and Poor's and Moody's Investor
Service cut Vietnam's debt ratings, while investors abandoned the country's
stock market. The crisis badly tarnished Vietnam's international reputation. It
put downward pressure on Vietnam's dong currency, and helped drive up
inflation, which only now is dropping back to the 14% on-year mark, as of
March, after peaking at 28% in August last year.
On
Friday, a Vietnamese court sentenced Vinashin's former chairman and chief
executive, Pham Thanh Binh, to 20 years in prison for ignoring regulations
governing the management of state-owned enterprises in order to speed up some
of the shipbuilder's ill-fated projects. Mr. Binh said he was a victim of the
global economic slump in 2008, rather than any conscious disregard for
Vietnam's rules.
Eight
other former executives at the firm, formally known as Vietnam Shipbuilding
Industry Group, were also sentenced to lengthy prison terms, and Vietnam's
government is taking additional steps to stop the rot at some other state-owned
enterprises.
Mr.
Dung recently removed the chief of Vietnam's state electricity generator after
the company diversified into the mobile phone business instead of focusing on
building up the country's sorely depleted generation capacity. Successful state
firms such as Vietnam Oil & Gas, or PetroVietnam, too, have pulled out of
high-profile real-estate ventures as the government recalibrates the
state-owned enterprises' role in Vietnam's economy.
In his
comments to The Wall Street Journal, Vietnam's premier said his government will
now focus on determining the scope and scale of the country's state sector.
"We
will define the role and functions of the state and state-owned enterprises in
a socialist-oriented market economy," Mr. Dung said, adding that the
government will "accelerate equitization to diversify the ownership of
state-owned businesses."
Vietnam's
leader said his goal is to "retain only a number of key state-owned
enterprises in certain industries."
There
are signs now that Vietnam is regaining confidence as inflation recedes. The
country's central bank recently eased back on interest rates in order to stimulate
more growth, while investors have been cautiously returning to Vietnam's equity
markets. Over the weekend, Vietnam and the European Union also agreed to begin
talks on developing a free-trade agreement.
Mr.
Dung told The Wall Street Journal that closer economic integration within
Southeast Asia will also help spur on Vietnam's economy.
He
predicted that plans to drop tariffs in the Association of Southeast Asian
Nations in 2015 will encourage a fresh surge of foreign direct investment into
the region, and will make it easier for Asean-based nations to invest more
heavily in each other's economies—something which Mr. Dung said is
"particularly significant" for the region's less-developed economies.
JAMES
HOOKWAY
wsj.com
Nguyen
Anh Thu in Hanoi contributed to this article.
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