Reforming state-owned enterprises (SOEs) to improve the socio-economic efficiency of this important sector in the national economy was initiated some time ago in Vietnam, ranging from the reform of management in SOEs to the current renovation of policies and mechanism on a comprehensive and macro level. Yet, the reform only gained full momentum over the last ten years.
The most salient feature of SOEs in Vietnam is that they used to operate in a highly centrally planned and subsidized environment. The state assigned to SOEs plans which had been approved by higher government levels, which included a system of targets, such as gross output, total value of production, main products, total payroll, profits, and transfers to the government budget. The government supplied the main materials, provided the markets for the products, and set their selling prices.
In the late 1970s and early 1980s SOEs found themselves in difficulty because the operation plans assigned by the government prevented them from operating efficiently and also because of the drastic cut in foreign aid and shortage of material supplies. This situation compelled the government to formulate appropriate policies to involve SOEs in joining the efforts of the government to ensure employment for the workers. On 21 January 1981 the government enacted Decision 25/CP with an aim of providing guide-lines and measures to develop the initiatives and financial autonomy of SOEs in business operations. This can be seen as the first breakthrough against the centrally planned mechanism which had controlled the management and operations of SOEs until that point in time. The reform of planning and economic accounting systems in SOEs aims at the following targets:
to create the necessary flexible environment for SOEs to increase production and be profitable;
to increase the financial autonomy of SOEs as well as motivate them to use all their equipment, material, and labour resources with the highest possible efficiency, thus reconciling the interests of the state with those of the enterprise and the workers, by motivating workers to increase their productivity and output, thereby increasing their income, improving their livelihood, and ensuring revenue for the government; and
to create conditions for SOEs to fulfil the government's plan, while at the same time motivating SOEs to make full use of their resources to produce more products for society, thus helping to satisfy the market demand for goods and services.