Laos to set state-owned enterprises on path to profitability
THE Lao government is figuring out how to turn stateowned enterprises into profitable ventures, aiming to make them more efficient and sustainable sources of income in the future, even though many are currently inactive.
This year, the state will continue to reform redundant businesses in which it has investments, to ensure they turn into profitable ventures and become strong bases for sustainable sources of income for the national treasury.
Prime Minister Thongloun Sisoulith presented a plan for business reform to the National Assembly last month.
According to the StateOwned Enterprise Development and Insurance Department, run by the Ministry of Finance, reform will focus on three main areas – business, finance and personnel.
The depa r t ment’s deput y d i re c tor-gener a l Sonephet I nt h av ong t old Vi ent i ane Times last week t hat inspect ion s r e v e a le d t hat some enter pr i s e s were r u n n i ng businesses t hat were not in line with t heir origina l object ive a nd c a r r ied out ot her operations instead.
T h i s i s one of t he mai n reasons why so many stateowned enterprises are ineffective.
T here a re many rea sons why t hese enter pr ises have gone into decline. On many occasions, t he state did not f ul ly pay for t he project s it initiated and some executives v iol at e d f i na nc i a l r e g u l ations. This problem persisted for many years. In addition, pl ac i ng r e s pon s i bi l it y f or management with managing directors alone frequently led to t he demise of t he operations they were supposed to run, Sonephet said.
The State-Owned Enterprise Development and Insurance Department has 183 enterprises under its supervision, but does not know how many have suffered from corrupt practices so is conducting another survey to learn more.
Sonephet said that this year the Ministry of Finance will carry out a survey of enterprises across the country and will make a priority plan to reform about 10 business units.
L a s t y e a r, a u t h o r i t i e s improved the performance of 10 business operations, including telecoms operator ETL and Lao Airlines. ETL made the switch to a joint venture with a Chinese company while Lao Airlines appointed a new managing director.
It is not easy to reform nonp e r f o r mi n g s t a t e - ow n e d enterprises as they have associations with various parties. However, the prime minister has pledged to pursue reform. This issue will not only be discussed in the National Assembly but also at various conferences held around the country. The government wants the Mi n i s t r y o f Fi n a n c e t o take greater responsibility for enterprise reform, he said.
Sonephet highlighted the case of ETL. “We completed the joint venture process with a Chinese company last year. But before the business can become profitable it will take time for the funding to come through, as it is not an easy process for the Chinese partners to transfer funds from China.”
He believes the company will complete the installation of telecom systems in the middle of this year.
The reform process will consider three groups of enterprises. The first of these is ineffective businesses, whose licences the state may decide to revoke.
Secondly, the ministry will consider whether some business can become joint ventures. If it decides this is not necessary, these businesses may no longer be useful, in which case the state can sell its shares or turn the business over to private ownership. The third area of consideration is businesses that are valuable to the state, and in which the state will continue to be the majority shareholder.
Alongside this, the ministry will prepare a strategic plan for the development of stateowned enterprise, including regulations that determine the rights and duties of their boards of directors.
It is believed that this strategic plan and new regulations will give a clear direction for the strong development, management and growth of state-owned businesses in the future.
In the past, such reforms were overseen by the committee of national state-owned business improvement under the Prime Minister’s Office. In 2016, this area of responsibility was transferred to the Ministry of Finance.