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 VIETNAM Banks and state-owned enterprises pledge to cut costs

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PostSubject: VIETNAM Banks and state-owned enterprises pledge to cut costs   Wed May 16, 2012 4:43 pm

Banks and state-owned enterprises pledge to cut costs

VietFinanceNews.com - Some 83 State-owned groups, corporations and four banks as of May 9 have registered to cut expenditures with a combined value of nearly VND13 trillion, but some experts have played down the significance of the figure.

According to the Ministry of Finance, the 83 State-run conglomerates (SOEs) registered to save nearly VND12.5 trillion, including VND3 trillion in management cost and VND9.4 trillion in material and energy cost. Meanwhile, the big four banks – Vietcombank, VietinBank, Agribank and BIDV – pledged to save over VND730 billion in operational cost this year.

The moves respond to Document 867/BTC-TCDN released by the ministry in January, which asks State-run firms to reduce 5-10% of production costs to help lower prices. The document also suggested enterprises to register detailed saving figures to administration units before March 31.

The ministry has also sent a document to the State Bank of Vietnam (SBV), suggesting SBV instruct State-run commercial banks to cut 5-10% of management costs so as to lower lending rates and improve business efficiency.

To encourage the scheme, Finance Minister Vuong Dinh Hue has attended some cost-cutting ceremonies of SOEs, touting them as the start for the SOE restructuring scheme.

However, many local and international economic experts have cast doubt on the efficiency of the program.

Jonathan Pincus, dean of the Fulbright Economics Teaching Program in HCMC, said the administrative measures could not help strengthen businesses.

Enterprises should decide to cut expenditures on their own to become more competitive on the market, not at the request of the finance minister, Pincus said.

With the saving announcements, SOEs still operate like a bureaucratic administrative unit, not an enterprise, he said, adding that if they are forced to compete, they will cut expenses to increase profitability, instead of responding to a administrative request by a minister. This is a critical problem with SOEs, Pincus noted.

Nguyen Dinh Cung, deputy head of the Central Institute for Economic Management, earlier told local media that he was concerned over SOEs’ saving programs. Cung wondered how the SOEs calculated their saving plans, what types of expenses were cut and how much they would reduce.

Vietnam now has nearly 100 State giants but their operations are unknown until State auditors or Government inspectors detect jaw-dropping figures about them.

People have suggested the enterprises make known their business plans as listed firms do but none of them have done it so far.


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