Vietnam’s state-owned companies are set to begin publishing audited earnings for the first time as the government improves oversight and tries to reassure investors following losses and corruption scandals.
All state-owned companies will have to publicly post results online at least once a year under rules expected to be signed by Prime Minister Nguyen Tan Dung within the next few weeks, Dang Quyet Tien, deputy head of the finance ministry’s corporate-finance department, said in a May 29 interview in Hanoi. In some cases, financial statements will be required quarterly, he said.
“It’s a fundamental change,” Tien said. State-owned companies will be required to publish information including sales, profit, losses, debt, return on assets, return on equity, cash flow and salary ranges, he said. Unlisted state companies only compile earnings once a year and there is no requirement to release the data publicly.
The regulations, which will probably come into effect in the second half, will also detail ministries’ responsibility over companies as well as potential penalties, Tien said. Vietnam is stepping up scrutiny as police seek an ex-head of the nation’s biggest shipping line accused of mismanagement and after eight shipyard executives were jailed for losses in March.
“It would be great if the government could begin to impose discipline on these firms, through transparency and forcing them to announce to the world exactly how they make their money,” said Jonathan Pincus, a Ho Chi Minh City-based economist at the Harvard Kennedy School’s Vietnam program. “The public tolerance for very risky speculation in the state sector is zero at this point.”
Concerns about a lack of financial transparency contributed to Standard & Poor’s downgrading Vietnam to BB-, three levels below investment grade, in December 2010. Moody’s Investors Service cut its rating on the country to B1, four below investment grade, the same month.
The police said this month they are looking for Duong Chi Dung after the ex-chairman of Vietnam National Shipping Lines fled his home in Hanoi on May 17. Dung, who has been suspended from his current post as head of the Vietnam Maritime Administration, is accused of “intentionally violating state regulations on economic management, causing serious consequences,” according to a posting on the government website last week, citing Col. Tran Duy Thanh, head of the economic- crime investigation bureau.
Dung and two other former executives at the ship and port operator, known as Vinalines, were involved in falsifying contracts that raised the cost of a floating dock to $24.3 million from $14 million in 2007, according to a May 22 posting on the government website.
“The Vinalines case has created pressure on the government to move faster with rules to scrutinize companies,” said Nguyen Duc Kien, deputy head of the National Assembly’s economic committee. “It had discussed this before, but hadn’t done much.”
Former executives at Vietnam Shipbuilding Industry Group were imprisoned for as long as 20 years in March after a probe into the company’s near collapse in 2010 under $4 billion of debt. Vietnam Electricity Chairman Dao Van Hung was also fired in February after the power company lost 11.5 trillion dong over two years, according to postings on the government website.
“We are concerned when we hear stories, reports about problems in the state enterprise sector,” Victoria Kwakwa, the World Bank’s Vietnam country director, said May 28. “You need to ensure accountability. You need to have clear targets for performance that SOEs are held accountable for. You need modern, clear management and governance.”