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State owned conglomerates take high loss, receive high income A series of state owned economic groups and general corporations report huge losses for the last many consecutive years, but the chiefs of the enterprises still receive huge incomes.

“Why can state owned conglomerates’ chiefs still can receive sky high incomes, even though their enterprises repeatedly take loss?” was the question raised by Do Manh Hung, Deputy Chair of the Social Affairs Committee to the Prime Minister Nguyen Tan Dung.

In fact, this is the matter of concern of not only Hung, but of many other people as well. The State Chief Auditor–Dinh Tien Dung, said before the National Assembly that Petrolimex incurred the loss of VND1,423 billion, but the chief of the enterprise still received VND70 million a month in 2010 and
VND58 million in 2011.

Dung, in the replied document, citing the current regulations on the salaries and wages for management officers, said that most of the conglomerates have strictly followed the regulations.

However, the Prime Minister admitted that some state owned enterprises (SOEs) defined the salaries and bonuses for the heads and their staffs not in accordance with the current regulations. The Rubber Industry Group, PetroVietnam, the State Capital Investment Corporation (SCIC) have been named when mentioning the violation of the principles.

Dung said that since the inspection by the State as the owner of enterprises has not been carried out regularly, which has led to the fact that the violations could not be found soon.

In other cases, some state owned conglomerates took profit because they had to sell products at the prices below the cost prices as requested by the State in an effort to intervene in the market and to stabilize the prices. The conglomerates include Petrolimex, the petroleum product distributor, and the Electricity of Vietnam (EVN).

Meanwhile, Dr. Le Dang Doanh, former Head of the Central Institute for Economic Management (CIEM), now a well-known independent economist, said the “high income for unprofitable enterprises’ managers” shows the loopholes of the laws relating to the business management.

Doanh noted that there has been no legal regulation which says that if CEOs or Presidents will have to see their salaries lowered if they cannot fulfill the business plans or take loss.

In other economies, according to Doanh, clear provisions are always set up in labor contracts to clarify the responsibility and the right of CEOs. The managers of enterprises would be required to undertake some works and fulfill some tasks during their terms, or they would be dismissed or receive lower salaries.

Meanwhile, such a regulation does not exist in Vietnam. The decisions by the State to appoint personnel to the posts of CEOs or Chair of the Board of Directors do not clarify the interests the personnel would get and the responsibility they have to take when their make profit or take loss.

“This is a weak spot in the state management work,” Doanh said.

Dr. Nguyen Minh Phong from the Hanoi Research Institute for the Socio-Economic Development, agreed, saying that this showed the shortcomings in the state’s enterprise management.

He emphasized that in a market economy, the pays to individuals must depend on their labor results.

Phong has called on to reconsider the regulations on the appointment of personnel to the important posts at state owned enterprises, especially big general corporations.

“It’s necessary to stipulate that the saleries and bonuses to individuals depend on the enterprises’ business results and their ability,” Phong said.


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