Priorities and sequencing in privatization of state-owned enterprises in the socialist Republic of Vietnam
2006
Nguyen Nhu Trang, Philippines Univ. Los Banos, College, Laguna (Philippines)
This study attempts to describe the Vietnamese government's objectives in sequencing SOE [state-owned enterprises] privatization using the models constructed and introduced by Gupta, Ham and Svejnar (2004). These four models pertain to four different objectives of the government proposed in this manuscript: i) Maximizing Pareto efficiency; ii) Maximizing the lost of control power; iii) Maximizing employee's support for privatization; and iv) Maximizing Information Gains. The models provided testable predictions about the factors that may affect sequencing in privatization. Because of the constraint in data availability, in this paper, profitability was employed as indicator of efficiency. For empirical purposes, firm-level data of privatized SOEs under the control of Hanoi People's Committee that were privatized during the period 1998 to 2004, was collected in order to test for the chosen objective(s) of the government. Regression results are consistent with government maximizing employees' support and maximizing efficiency through information gains. The fact that privatization policy is favoring sale of stocks to insiders (SOEs' employees) seems to root from the intention of the government in gaining employees' support for the policy. This leads to the situation, which affects negatively to the corporate governance of the enterprises that most management positions of the privatized firms were left unchanged after privatization. Hence, it is recommended the state to gain employees' support through other channels like increasingly privatization related issues in the radio, television and the press and to revise privatization policy toward sale of stocks to strategic investors from outside of the firms.
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