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Doubts raised over plan to hire state capital representatives   2010-10-18 - Thoi bao Kinh te Vietnam

The State Capital Investment Corporation (SCIC), which specializes in making investment with state capital, has revealed the plan to hire people to represent state capital in enterprises. The plan has raised doubts about its feasibility, because a previous attempt to hire CEOs, failed completely.

A failed plan

In 2004, the Government allowed the Enterprise Renovation Department under the Government Office to build up the pilot plan on hiring CEOs for state owned enterprises (SOEs). It was expected that the pilot plan would be implemented in five big enterprises.

However, only two of the five hired CEOs at that time, including Vinamotor. Tran Quang Thanh, the hired CEO of Vinamotor, resigned after one year. Finally, Vinamotor has decided to return to the old scheme, whereby CEOs were appointed by the state.

No official review of the trial mechanism for hiring CEO has been conducted, but analysts have pointed out that the plan has failed completely.

There are many reasons behind the failure. However, the biggest problem, once again, lies in the mechanism. Opinions from the well-informed circle said Thanh resigned because he was not given the power to make the decisions related to the workforce or take responsibility for the business plan. Everything was decided by the board of directors, and Thanh just simply did what he was told to do.

As for SOEs, CEOs do not have the full right to make decision on the issues related to the workforce. For example, they have to get the approval from the enterprises’ party committees when appointing persons for key positions, such as deputy director or heads of departments.

Another reason for the failure of the plan is the modest salary offered to CEOs. Under the current regulations, the total monthly income of CEOs at SOEs must not be higher than 40 million dong. The modest pay has obviously kept talented people away.

Another plan will go another way

SCIC is considered the most powerful corporation in Vietnam, because it manages 11,600 billion dong worth of the state capital which has been poured into 540 enterprises. The state capital management is being carried out through nearly 600 capital representatives in enterprises.
In an effort to manage the state capital more effectively, so it can bring the highest possible effects, SCIC plans to hire people who will represent the state within the enterprises and manage the capital.

The idea has been applauded by economists. However, it will still much depend on the implementation mechanism.

According to SCIC, acorporation will sign contracts with the capital representatives, and clearly point out the benefits, the rights and the duties of both SCIC and the capital representatives. The work result and capability of the representatives will be the main point SCIC will consider when making decisions on the policies toward the representatives.



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