To improve the quality of public products and services, the Government in June 2015 issued a decision to transform public non-business organisations into joint-stock businesses.

Illustrative image (Source: VGP) 

This helped the State attract more private investors to involve in producing public products and services, improve the governance and quality of the units, and increase labour productivity and income.

After four and a half years, the number of successfully-transformed units has remained modest and there are many challenges that need to be resolved.

Almost 340 public non-business units and organisations have been enlisted for the transformation since June 2015. Of the total, 31 units have completed the process and 38 units have gained approval for their transition plans.

One of the units is the Transport Hospital, which became a joint-stock business in October 2015.

According to the Ministry of Finance, the transformation plan has lagged behind schedule set for 2015-2020 period as the number of successfully-transformed units accounts for only 14.5 percent.

Some have not implemented the plan properly while others have delayed the transformation. In some provinces and districts, the post-transition business plans have remained inappropriate.

In addition, transformed units have not been managed correctly and the quality of products and services dropped with some no longer available.

To improve the transformation process, the Ministry of Finance is working on a new decree. According to Dang Quyet Tien, Deputy Director of the Department of Enterprise Finance, the new decree is expected to resolve the issues public non-business units have encountered with their transformation.

Under the draft, a unit or an organisation that wants to be transformed can be state and government agencies, units under ministerial management, local authority departments and offices, schools, hospitals, sub-units of State-owned enterprises and State-owned limited liability companies.

Nguyen Thi Le Thu of the National Institute for Finance at the Ministry of Finance said to lure investors to targeted public non-business units, they should be productive and their products are widely accepted and purchased.

Moreover, the products should be necessities and they should be accessible to a large part of the population.

A regulation is needed for those units to address their financial issues, property rights for assets and land areas, the State control and management, and policies towards employees in the post-transition stage.

To assure the quality of products and services provided in the post-transition stage, the State needs to issue standards to supervise the production process and deal with violations.

The State has to control prices of some services such as university fees, waste collection and management, and public transport to make sure they are broadly affordable.

The transformation process needs to go into stages through which public non-business units are encouraged to fully take control of their own finance and governance.

The State may either sell its ownership entirely or issue shares to potential investors to increase the charter capital of the unit.

Vu Hoang Quyen, World Bank senior economist, said the transformation must be assessed carefully and the Government needs to choose the right sectors that are suitable for the transition.

“The State takes a big role in the management of fundamental public services like healthcare and education. The list of units to-be-transformed must be developed upon the assessment of the State responsibility in the post-transition units,” she said.

Other important factors include information disclosure and transparency, handling differences between the ceiling prices of public services set by the Government and the prices provided by the privatised units, she added.

Quyen suggested the units are turned into State-funded companies so they must get used to operating as a business, then they are totally privatised. In addition, the State must take control of financial management in those businesses and its role must be legalised.