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VIETNAM ACADEMY OF SOCIAL SCIENCES

GRADUATE ACADEMY OF SOCIAL SCIENCES

LE NA

THE CURRENT LAW ON CORPORATE
GOVERNANCE IN VIETNAM

Major: Economic Law
Code: 9 38 01 07

SUMMARY OF DOCTORAL THESIS IN LAW

HANOI - 2019


The Doctoral thesis was completed at:
GRADUATE ACADEMY OF SOCIAL SCIENCES

Supervisor: Assoc Prof. Dr. Nguyen Nhu Phat
Reviewer 1: Prof. Dr. Nguyen Thi Mơ

Reviewer 2: Assoc Prof. Dr. Duong Dang Hue

Reviewer 3: Assoc Prof. Dr. Vu Thi Lan Anh

The thesis is defended before the thesis appraisal board of the
Academy at the Graduate Academy of Social Sciences at:
......hours, date ......... month...... 2019.

The doctoral thesis can be found at:
- National Library of Vietnam;
- Library of Graduate Academy of Social Sciences


LIST OF AUTHOR’S PUBLISHED WORKS
1. Le Na (2017), Restructuring state-owned enterprises according to
current Vietnamese law, Journal of People’s Court, No.22, December 2017,
pages 40-46.
2. Le Na and Hoang Mi (2018), Assessment of legal framework for
state-owned enterprises and making suggestions, Trade and Industry
magazine, No.7, May 2018, pages 188-194.
3. Le Na (2018), The law on transparency, supervision in
governancing Vietnamese enterprises and international, Trade and Industry
magazine, No.9, June 2018, pages 32-36.

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PREAMBLE
1. The urgency of the Topic
In Vietnam today, corporate governance is a matter attracting
much attention of researchers and investors as well as business
managers. But in fact, the research on corporate governance often
focuses mainly on joint stock company (“JSC”), especially listed and
public joint stock companies. Until the time when SOE is recognized
as 100% state-owned enterprise - the time when the Enterprise Law
2014 came into effect, it only operated in a single form of onemember limited liability company (“One-Member LLC”). Therefore,
in terms of form, the regulations on JSC governance almost no longer
affect SOE, while the governance in One-Member LLC with 100%

state-owned capital has not been focused on specific characteristics
of SOE. Therefore, the focus of research on SOE governance should
be considered urgent.
2. Purpose and task of research
2.1. The purpose of the research: The purpose of the Thesis
is to base on the theoretical model of SOE governance to identify the
current status of statues and the implementation of the law on SOE
governance in context of international integration and improvement
of legal institutions of market economy in Vietnam today. The
ultimate purpose of the Thesis will be the proposal of appropriate
solutions to supplement and improve the legal regulations and
enforcement of SOE governance in Vietnam. Thereby, the Thesis
contributes to improving the capacity of SOE governance and at the
same time limiting the socio-economic consequences arising from the
weaknesses in SOE governance in order to improve the business
performance of SOEs today.
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2.2 Research tasks: On study of the economic nature, the
specific legal nature of SOE, thereby clarify the theoretical and
practical implications of SOE governance according to the current
Vietnamese law; explore the dominant factors which influence on
SOE governance and the basic contents of Vietnamese law on SOE
governance; Research and compare models, legal regulations,
standards and international practices on SOE governance; Analyze
and assess status of the law and enforcing the law on SOE
management so that it can point out the shortcomings and
insufficiencies in law and the practice of SOE governance compared
to the needs of SOE governance and with international standards on

corporate governance in general and SOE governance in particular;
Analyzing and evaluating to determine the direction and giving
appropriate solutions to supplement and improve and enforce the law
on SOE governance in our country's current economic conditions.
3. Subject and scope of the research
3.1. Subject of the research: Forms of SOE according to
Enterprise Law 2014; SOE models in the past; Contents of corporate
governance and SOE governance; the impacts on SOE under the policy
of developing the SOE system in Vietnam; The system of legal
regulations on corporate governance in general with focus on the law on
SOE governance in Vietnam; Legal regulations, standards, practices and
international experience in corporate governance in SOEs.
3.2. Scope of the research: Until now, the concept of SOE
has changed, SOE must be the enterprise with 100% charter capital
owned by the State. That is, there is no matter of capital linkage in
SOE, therefore, the model of JSC governance cannot apply to the
form of one-owned enterprise such as SOE. Therefore, in order to
ensure the consistency between the Enterprise Law 2014 and the Law
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on management and use of state capital in 2014, the Thesis only
focuses on research on the governance law of enterprises with 100%
state-owned capital operating in the form of One-Member LLC.
4. Methodology and research methods
4.1. Methodology
Throughout the Thesis, the researcher uses the method of
dialectical materialism and historical materialism of MarxismLeninism. At the same time, the Thesis applies the views of our Party
and State on the leading role of the state economic sector, focusing
on SOEs for the development of the socialist-oriented market

economy in our country today. Besides, the general principles of
corporate governance in the market economy, the above mentioned
theories etc. are also used to solve research tasks.
4.2. Specific research methods
Methods of analysis and synthesis are used in almost all
contents of the Thesis. Methods of analysis and synthesis of
secondary documents and statistical methods are used to collect,
synthesize and evaluate documents on the status of SOE governance
laws in Vietnam and international lessons and experiences.
Comparative and typical methods are used to analyze and evaluate
models and laws on SOE governance in some other countries in the
world; Assessing the limitations, disadvantages and shortcomings of
the legislation on SOE governance in relation to the principles of
SOE governance as recommended by OECD.
5. New points of the Thesis
First, the Thesis analyzes and systematizes concepts, legal
bases, theoretical issues related to corporate governance and the law
on SOE governance; Second, it provides information, finds problems
and objectively assesses the status of SOE governance in accordance
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with current Vietnamese law; Third, the Thesis proposes specific
views and solutions on the basis of objective judgments in the real
situation combined with the comparison of modern corporate
governance principles and governance laws of other countries to
improve the law on SOE governance in Vietnam.
6. The scientific and practical significance of the Thesis
The Thesis builds a theoretical system of SOE governance
and the law on SOE governance, including the author's point of view.

The Thesis also clarifies the relationship between the role of legal
regulations on corporate governance and the effeciency of SOE. At
the same time, analyze and assess the current status of the law on
SOE governance in Vietnam, on that basis, work out orientations and
solutions to improve the law on SOE governance. Therefore, the
Thesis has the scientific and practical significance.
7. Structure of the Thesis
In addition to the preamble, conclusion and list of references,
the Thesis is structured with 4 chapters:
Chapter 1: Overview of research situation, theoretical basis
and research method
Chapter 2: Theoretical matters on SOE governance and the
law on SOES
Chapter 3: Current situation of law and enforcement of state
governance law in Vietnam today
Chapter 4: Views and solutions to improve the law and the
efficiency of the law on SOE governance in Vietnam today.

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Chapter 1
OVERVIEW OF RESEARCH SITUATION, THEORETICAL
BASIS AND RESEARCH METHOD
1.1. Overview of research topic
1.1.1. Scientific works related to the topic of this Thesis
1.1.1.1. Research in overseas
Group of research works related to corporate governance
and SOE governance: Regarding the concept of SOE, countries in
the world have their own definitions and names. However, when

considering the above mentioned concepts, it shows a common point
on the nature of diversity in the structure of SOE. Governance of
SOE often presents many weaknesses and lower levels of effective
governance compared to corporate governance in the private
ownership sector. The corporate governance manual of IFC
(2010)[156] in Vietnam has systematically reviewed and analyzed
Vietnamese legal documents on corporate governance in effect at the
time of 2010. Basing on that, a general assessment of corporate
governance laws in Vietnam was given and SOE is not outside the
scope of the study. G20 / OECD (2015) [150] is a Code of Conduct
with 6 major parts on OECD recommendations focus on public JSC.
Group of research works related to the status and
implementation of the law on SOE governance: OECD (2014) [171]
was based on the actual survey results of applying good practices on
corporate governance in countries in Asia, including Vietnam. The
report has quite specific assessments of information disclosure,
ownership and control matters. In particular, the assessments of the
law enforcement mechanism, the organization of law enforcement
organs and the system of corporate governance laws mentioned
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above. This is a source of "good guidance and practice" to help
managers as well as policy makers in Asian countries in general and
in Vietnam in particular to have a broader view of the
implementation of governance practices in their countries.
Group of research works related to solutions to improve
and implement the law on SOE governance, OECD (2005)
recommends the governance of SOEs by 06 specific proposals: First,
ensuring the legal framework and effective regulations for SOEs;

Second, establishing a unified policy system to ensure transparent
and effective implementation of governance in SOEs through the role
of State ownership; Third, ensuring shareholders are treated fairly;
Fourth, recognizing the responsibility between SOEs and
stakeholders by the State's ownership policies; Fifth, standardizing
the transparency and disclosure of information; Sixth, recommending
the Board of Management of SOEs to have the adequate capacity and
authority to carry out their responsibilities in the most objective and
impartial way and be responsible for their decisions..
1.1.1.2. Research in Vietnam
Group of research works related to the rationale and status
of the law on corporate governance and SOE governance: Pham
Duy Nghia's research (2015) [98] makes it easy to imagine the
economic picture of Vietnam in integration time through a legal
perspective. At the same time, it directly refers to the model of SOE,
as well as generally analyzes and assesses legal issues surrounding
this model, including governance issues. Pham Duc Trung (2011)
[122] has reviewed the legal system on SOE governance by 2011,
which reveals many shortcomings and obstacles to the improvement
of SOE governance.

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Group of research works related to the implementation of
law on SOE governance: A picture of the status of SOEs in Vietnam
over the past time with "much more darkness than brightness" is the
content in Nguyen Thi Thanh Vinh's research (2016) [127]. Another
picture of the current status of corporate governance law, by Pham
Duy Nghia (2013) [96] has outlined the overview of corporate

governance in Vietnam with information and warning numbers. At
the same time, it also assesses and proposes the application of
modern governance model as well as specific experiences and lessons
of other countries on corporate governance in Vietnam.
Group of research works related to solutions to improve
and inhance the effectiveness of implementing the law on SOE
governance: The authors Pham Duc Trung (2011), Pham Tri Hung
and Nguyen Trung Thang (2012), Nguyen Thanh Tam (2013)
suggested one of the urgent solutions of the law on SOE governance.
Le Vu Nam (2012) affirmed that it is necessary to consider the
amendment, supplement or issuance of a new regulation on corporate
governance at that time. Sharing the same idea, one of the solutions
of Le Minh Toan (2015) is the promulgation of separate regulations
on state governance. Nguyen The Manh (2014) [88] proposed
solutions to publicly disclose all responsibilities and obligations of
SOE in its production and supply of public services and its social
responsibilities as well as the State's goals for each business; to
promulgate and disclose clearly and transparently the appointment
merchanism for members of the Board of Directors of enterprises
with 100% state capital. The building of corprate model and
governance framework suitable for SOEs in Vietnam is proposed in
many studies.

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1.1.2. Evaluate the research and the content to be addressed
in the thesis
1.1.2.1. Assessment of the research related to the Thesis:
First, the research mentions a sufficient theoretical basis of corporate

governance as well as SOE governance, the necessity of corporate
governance in the SOEs ... However, most of the studies have
approached these matters from an economic perspective, very few
base on the perspective of legal science. Second, regarding legal
practices on SOE governance, researches often only present some of
the status of corporate governance of SOEs, pointing out
inappropriate regulations in legal documents but not provides a deep
analysis of the problem. Third, regarding the solution, the researchers
have proposed quite a lot of highly enforceable solutions, but mainly
focused on the general corporate governance law; for the
improvement of the law on SOE governance, there are some oriental
solutions but without specific solutions.
1.1.2.2. The basic contents to be addressed in the Thesis:
First, basing on the results of previous research works, the Thesis
focuses on in-depth research on the legal aspects of corporate
governance, governance of SOEs, SOEs, and laws on SOE
governance. At the same time, to contribute and supplement to
complete the theoretical basis of SOE governance. Second, to focus
on clarifying if new provisions of the Enterprise Law on the
organizational and managerial structure as well as the obligations of
information disclosure of SOEs are tight enough and suitable to the
characteristics of ownership and composition of SOEs. Third, to
focus on analyzing the issues of related policy mechanisms such as
governing regimes, the separation between ownership and
management rights, the implementation of SOE ownership rights,
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monitoring and information transparency on SOEs. Thereby building
a legal framework suitable for modern SOE governance. Fourth, to

study, compare and summarize lessons and experiences from
international standards, practices, models of SOE governance and
practical laws of developed countries and other countries have a
regime similar to Vietnam. Since then, to apply to the process of
improving the law on SOE governance in our country. Fifth, to
recommend the overall and detailed views, goals, directions and
solutions to improve the law on SOE governance in Vietnam.
1.2. Theoretical basis
1.2.1 Theoretical basis
When studying SOE governance, PhD students use some
typical theoretical basis as follows: Representation theory is used in
chapter 2 of the Thesis, theoretical part on SOE governance; The
theory of corporate governance is used in chapter 2 of the Thesis to
clarify the matters of corporate governance; The theory of legal
entities is used to research and analyze the responsibility of SOEs,
the capacity of SOE owners' responsibility in the process of doing
business; The theory of risk and risk control is used throughout the
Thesis to analyze the effects of risk and risk control on SOE
governance.
1.2.2. Research hypothesis:
The Enterprise Law 2014 has made progressive regulations
from rationale about SOE governance, but when applied in practice
there are still shortcomings, limitations, inappropriate points and
especially lack of synchronization with other provisions in the
regulatory system on SOE governance. Law on SOE governance
includes 5 parts. However, OECD's approach to SOEs is not the same
as the Enterprise Law 2014 on SOEs. SOEs in Vietnam have been
9

ineffective for many years. The main reason comes from the
management capacity, from the provisions of the law on governance
in SOEs which are not strict enough and cannot ensure feasibility.
Currently, corporate governance worldwide is recommended to
follow OECD principles and models, including recommendations on
SOE governance. In principle, Vietnamese SOEs can apply the
OECD model but because SOEs in Vietnam exist in a imperfect
market economy mechanism, it is difficult to apply international and
foreign experiences to Vietnam.
Chapter 2
THEORETICAL MATTERS ON SOE GOVERNANCE AND
ON LAW ON SOEs
2.1. Theoretical matters of SOE governance
2.1.1. Overview of corporate governance
2.1.1.1. Concept of corporate governance: The concept of
corporate governance so far being considered the most specific, most
comprehensive and most widely used by various countries is the
concept defined by G20 / OECD (2015):
2.1.1.2. Principles of corporate governance: Until now,
OECD's principles of enterprise governance are still widely applied
in member countries. Enterprises in general, policy makers and state
administration agencies are the targets of OECD's Code of
Governance. There are six key contents of the corporate governance
principles proposed by the OECD.
2.1.2. Concept of SOE from a governance perspective
2.1.2.1. The concept of SOE: The most recent and currently
applied concept is the concept of SOEs in the Enterprise Law 2014:
"State-owned enterprises are enterprises with 100% charter capital
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owned by the State. "[11, Article 4]. Thus, SOEs are brought to the
original concept with the absolute ownership of state owners.
2.1.2.2. Features of SOE: The purposes of the state economic
sector in general and SOEs in particular are national socio-economic
development goals and policies. Means to complete policy objectives
are also SOEs and through SOE business activities. Thus, the nature
of SOEs is that it is both the objective and the way that cannot be
separated for the State to fulfil its objectives of stability, balance and
development of economy and society. On the other hand, the role and
concept of SOEs at each time have certain differences. However, to
agree on how to understand SOEs, it is possible to pick up features
that directly affect SOE governance under the current law.
2.1.3. Governance of SOE: Principles, contents and
requirements on corporate governace in general are theoretically
applicable to all enterprises including enterprises with state capital
contribution and SOEs - two typical forms because of the
participation of State owners. First, ensure an effective legal and
management framework for SOE; Second, the role of the owner of
the State; Third, the relationship of SOEs with related parties;
Fourth, transparency and information disclosure; Fifth, the
responsibilities of the Members' Council.
2.2. Law on SOE governance
2.2.1. The concept and differences of the law on SOE
governance in comparison with the general corporate governance law
It is possible to generalize the law on SOE governance as the
overall principles, statutes and regulations of SOEs on the internal
management structure of SOEs and measures to control enterprises
to protect interests of the owners, stakehoders, and the whole
society. Accordingly, the content of the law on SOE governance has

11


certain differences compared to the Law on corporate governance in
general due to the differences in nature and operational objectives as
well as nature of ownership of this type of enterprise.
2.2.2. Content of the law on SOE governance
2.2.2.1. Regulations on governance model and management
institutions of SOE:
- Regarding governance model;
- Regarding management institutions:
2.2.2.2. Law on the operation of the State as a prudent and
responsible owner: State activities in the role of active owner and
responsibility to ensure effective SOE governance is the content
covering many aspects.
2.2.2.3. Legislation on SOE relations with its stakeholders:
SOEs' stakeholders are organizations and individuals that have rights
or obligations directly or indirectly related to that SOEs. Therefore,
in SOE governance, the stakeholders are considered the most
important. In addition, "Stakeholders" are also organizations and
individuals that have direct or indirect relationships with the
enterprises, in some cases related to SOE governance which can creat
risks, lack of transparency or harming the interests of SOEs.
2.2.2.4. Law on public disclosure and transparency: Law on
disclosure and transparency of information focuses on legal-related
contents for information to be disclosed, information recommended
to be disclosed, and mechanism to ensure the accuracy of
information; ensure the regulations on information disclosure and
transparency applied to coordinating agencies, owner, and enterprises
themselves; ensure compliance with recommended OECD principles

on disclosure and transparency.

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2.2.2.5. Legislation on the responsibilities of the Members’
Council: The Members’ Council is the representative of the owner in
the SOE appointed by the representative of the owner. Therefore, the
binding regulations in terms of benefits and responsibilities of the
Members’ Council with the State owners in the law on the
responsibility of the Members' Council is the content to be focused
on. Besides, it is necessary to note the contents on: objective and
necessary authority to implement the function of strategic orientation
and supervision of the Members’ Council.
2.2.3. Comparison of governance of SOE with 100% state
capital and governance of State enterprises which State holds
dominant rights: Firstly, managing 100% state-owned enterprises is
the management of single-owned enterprises by the State. Second,
because it is a single-owned enterprise, it cannot be organized in
forms of limited liability companies with two or more members or
JSC. Third, management of 100% state-owned enterprises “is
associated with the accountability of a chain of representative
agencies, organizations and individuals”. Fourth, separating state
ownership from state management functions in 100% state-owned
enterprises is sometimes impossible. Fifth, in the environment with
many incentives, the management of 100% state-owned enterprises is
not under pressure of information transparency and disclosure,
separating public interests from business activities...
2.3. Factors affecting the law on SOE governance
The law on SOE governance is governed by many factors, in

which, the market economy, the structure of SOE ownership, the
subject of SOE governance, culture, business practices and the level
of economic integration into international economics are the most
powerful factors:
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Chapter 3
CURRENT SITUATION OF LAWS AND ENFORCEMENT OF
LAW ON SOE GOVERNANCE IN VIETNAM TODAY
3.1. Actual state of law on SOE governance
3.1.1. State corporate governance model and SOE
governance institutions
A. State corporate governance model: Enterprise Law
2014 regulates the organizational structure of SOEs and OneMember LLC with 02 operation models and the owner’s
representative can choose.
B. Institutions of governance of SOEs: regarding Enterprise
Law 2014, it is possible to see advances in SOE governance regulations,
especially in terms of titles in the SOE management structure. However,
due to co-operating under the management model of One-Member
LLC, SOEs also have separate regulations in Chapter IV of the
Enterprise Law 2014 and other separate legal documents leading to the
acquisition the number of regulations on responsibilities and obligations
of titles is incomplete, not really clear and reasonable. At the same time,
the legal position of the components in the 02 operating models of SOEs
also has certain differences compared to the regulations for OneMember LLC owned by a non-state organization. Namely:
Representatives of owners in SOEs: The law provides for:
Members 'Council and members of the Members' Council; Chairman of
the Members' Council; Company president; The manager responsible for
daily activities at SOEs.

3.1.2. Regulations on the operation of the State as an
enterprise owner: Up to now, the biggest result of the governance
framework is the first step to build a legal foundation for the business
14


environment, fair competition between SOEs and enterprises of other
economic sectors. Directly related to the contents of SOE governance,
the legal framework addresses important issues.
Shortcomings and limitations of the law on SOE owners:
First, the current legal regulations on SOE owners have not yet
identified ownership functions with other functions, especially the
administrative capacity of the State in relation to SOEs. Second, there
are no regulations allowing creditors to propose the innitiation of
procedures for dissolution and bankruptcy of SOEs. Third, the legal
status of SOEs is equal to other enterprises, the law does not need to
create mechanisms that are too specific for SOEs. Fourth, the law has
not yet separated the responsibility for production, public service
provision and other responsibilities of SOEs. Fifth, althoughin the
general spirit of Vietnamese business law, there is equal in all aspects
between SOEs and non-state enterprises, there are still many regulations
that are unclear or stipulate in a general way. Sixth, the legal mechanism
does not ensure fairness in access to financial resources. SOE
governance in accordance with international practice requires SOEs not
to use its relationship with state-owned commercial banks to access
financial resources, but to apply a competitive mechanism and pure trade
relations.
3.1.3. Responsibilities of SOE with its stakeholders: As a
One-Member LLC, SOE has full of responsibilities and legal
obligations to its customers, partners, and owners (State), with

employees as well as social responsibility (CSR) like all other OneMember LLCs, in addition to the specific provisions stipulated in
Enterprise Law 2014. Responsibility for stockholders is a content that
very few SOEs were interested in, especially SOEs operating in
monopoly sectors. However, recently, because of the importance of
15


competition in a level playing field, SOEs have become interested in
the relationship with related parties.
3.1.4. Disclosure and transparency of information: The
company must publish periodically on the website of the company
and the representative owner of the information required by Law. The
content of information disclosure specified in the report may include
the financial statements of the parent company and the consolidated
financial statements. Information to be reported and published must
be complete, accurate and timely in accordance with law. The legal
representative or authorized person discloses information. The legal
representative must be responsible for the completeness, timeliness,
honesty and accuracy of the published information.
3.1.5. Responsibilities of the Members’ Council in the
governance of SOEs: Some important functions of the Members’
Council such as strategic orientation and monitoring in practice have
not been effective. Some surveys at regular and unexpected meetings
of Members' Council in SOEs showed that the content of the meeting
was very rarely relating to the long-term development strategy of
enterprises but still focused on report quarterly and annual business
results; discuss and decide: business operation plan, solutions to
problems, personnel issues, investment projects ...
3.2. Current status of implementation of legal regulations
on corporate governance

3.2.1. Regarding models and institutional governance of
SOEs: The first issue that has been mentioned for a long time by
many legal and administrative researchers is the separation of the
ownership function and the state management function in SOEs. The
second issue related to the above administrative gaps is also an
overlap between the management and monitoring contents of various
16


management organs. The third issue of weakness in the SOE
governance model is that it has not clearly defined the role of the
State in SOE governance as well as the determination of the profit
targets or public utility objectives of SOEs. The fourth issue is that in
fact, the State has not yet been able to separate itself from the day-today management of SOEs and allow SOEs to fully self-operate to
achieve their defined objectives. The fifth issue, the implementation
of the rights and obligations of state owners in SOEs is still
inadequate. The sixth issue, the issue of management, supervision and
evaluation of SOEs and implementation of the function of state
ownership is inadequate.
3.2.2. Responsibilities of SOEs for stakeholders: There are
still many standards related to relationships with third parties that
have not yet reached, as well as many shortcomings and limitations
that need to timely adjustment: First, not respect the rights of
stakeholders. Second, there has not been a clear and specific report on
the relationship with stakeholders. Third, there are very few
Members’ Councils of SOEs, the Board of Directors of subsidiaries
implementing the development, announcement, implementation and
propagation of the program to comply with the internal business
ethics rules based on national standards, in line with international
commitments and application for SOEs.

3.2.3. Regarding the level of disclosure and transparency of
information: First, the quantity and quality of published information
does not meet the requirements of international governance
standards. Second, the internal audit has not been focused, the
efficiency is low, and even being "disabled" in some SOEs. Third,
the independent auditing of SOEs is now very weak. Fourth, the
communication between SOEs and state owners does not run
17


regularly. Fifth, sanctions for SOEs and representative organs that
fail to comply with the requirements of public disclosure are mainly
common administrative sanctions.
3.2.4. Regarding the powers and responsibilities of the
Members' Council: Although the Members’ Council is the
representative of the owner in the SOEs, the representative of the
owner decides to appoint, but in essence, they, together with
executive department, are labors. They both are not managing their
own capital, so there is not much binding on the interests and
responsibilities of the owner. Even, instead of implementing the
monitoring function, the Members’ Council can abuse its powers to
collude and cooperate with executives in order to "make their own
benefits and empty the SOEs”.
Chapter 4
VIEWPOINTS AND SOLUTIONS TO COMPLETE THE LAW
AND IMPROVING THE LEGAL EFFICIENCY OF SOE
GOVERNANCE IN VIETNAM TODAY
4.1. Viewpoints to improve the law on SOE governance
4.1.1. Completing of the law on SOE governance should be in
line with the development trend and the orientation and roadmap of

market and economic reforms of the Party and State: The law on SOE
governance therefore needs to be consistent with those political and
institutional premises to contribute to the successful implementation
of restructuring, ensuring the role of SOEs in the market economy
and in international economy integration. However, due to
inadequate political, institutional and legal premise resulting from the
implementation of the divestment plan so far, the results have been
18


limited, especially for non-core divestments of SOEs.
4.1.2. Completing the law on SOE governance must
approach international standards and practices, especially from the
developed industrial countries that are members of OECD: More
than ever, the experience and advantages of the Corporate
Governance in general, the governance of SOEs in particular in the
world (especially the principles of OECD on SOE governance)
applied in accordance with the economic conditions of Vietnam is a
tremendous step necessary to improve the law on SOE governance,
creating a clear change in governance capacity and operational
efficiency of SOEs.
4.1.3. Completing the law on SOE governance should be
associated with the process of completing and amending the law on
enterprises, completing market economy institutions: With 02
chapters in Enterprise Law 2014 (chapter III, Chapter IV) and related
documents compared to modern governance requirements are still not
sufficiently legal basis for Vietnam's SOE governance to catch up
with advanced management standards and practices in the world. In
addition, until now, there are no strict regulations on SOE
governance, especially the set of SOE governance principles in line

with economic conditions and SOE specific characteristics on the
basis of compatibility with principles and requirements of modern
governance.
4.2. Specific solutions to complete the law on SOE
governance:
4.2.1. Ensuring the consistency, synchronization and
transparency of the law on SOE governance: Unity,
synchronization and transparency of SOE governance law means
ensuring a solid legal foundation for SOEs to operate in an equally
19


competitive business environment like other private enterprises and
create a basis improve the reality of credit institutions in SOEs.
However, with the current status of SOE governance law and the
requirement of compatibility with OECD standards, to ensure
consistency, synchronization and transparency, specific solutions
need to be implemented.
4.2.2. Completing laws to ensure the State is a real and
responsible owner: In order to become the real and responsible
owner in the process of realizing its ownership functions, the State
should have specific and detailed governance rules and regulations
and be consistent with the governance standards of OECD
recommendations.
4.2.3. Completing legal provisions on SOE responsibilities
in relation to related parties
In Vietnam, there are quite a few standards on the
relationships with third parties (especially the customers, creditors,
co-owners in the subsidiaries of SOEs) as well as numerous
shortcomings and limitations in regulations need to be adjusted

promptly. The specific solutions are proposed as follows: First, the
law needs to supplement more coherent regulations on conditions to
ensure the respect of the rights of parties involved in SOE operations;
Second, continue to improve regulations on communication
activities, reporting to related parties. Third, it is necessary to
develop and promulgate specific guidelines on internal rules
applicable to SOEs that meet the national and international
standards..
4.2.4. Completing the regime of information disclosure and
transparency in the law on SOE governance: The shortcomings and
limitations lead to a lack of information transparency and disclosure of the
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Vietnamese SOE system not only fall upon the responsibility of SOEs and
managing organs, but also due to legal regulations. The law is not strong
enough, not specific and not yet feasible. Therefore, it is necessary to have
new solutions for the process of completing the law on information
transparency and disclosure of the SOE system.
4.2.5. Completing legal regulations to maximize operational
efficiency of and prevent the possibility of abuse of the Members’
Council and managers power in SOE governance: In this aspect,
the empowering of additional rights autonomy for Members’ Council
does not come with the adequate monitoring regime, it is very easy to
abuse the Council's powers in the process of implementing
responsibility for SOEs. Therefore, it is always necessary to have
legal and enforcement measures to prevent the risk of abuse of the
Members’ Council powers and ensure that the Members’ Council
must "operate with integrity and be responsible for the actions of I
”as OECD's recommendation.

4.3. Some solutions to improve the effectiveness of law
enforcement on SOE governance in Vietnam
4.3.1. Raising awareness of SOE on corporate governance
and SOE governance laws: The proper understanding and awareness
of SOE governance as well as the law on SOE governance will help
governance organs understand the role of corporate governance and
the importance of good implementation of SOE governance laws for
the performance of SOEs. Therefore, it is necessary to focus on
training, educating, communicating of governance law on SOE
governance for all members of the Members’ Council, members of
the Executive Board, the Supervisory Board, the Supervisors in the
SOEs, the related parties and whole community.

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4.3.2. Improving capacity, professional qualifications and
legal awareness for management and supervision team of SOE
The recent typical cases such as the case of Oil and Gas
Group investing in Ocean Bank or the previous Vinashin case with
huge losses originate from the decisions or the misconduct or
recklessness of the leadership. Therefore, in order to improve the
efficiency of law enforcement of SOE governance, it is important to
improve the capacity, professional qualifications and legal awareness
for SOE managers and supervisors..
4.3.3. Promoting the process of applying international
standards on governance of SOE: Promoting the application of
modern governance principles is a general trend and is consistent
with the current integration process of SOEs which facilitate law
enforcement in the country. However, it is also important to take into

account the general principles applied to many countries with
different conditions of implementation and legal regulations such as
OECD principles. At the same time, these are essentially nonmandatory recommendations, so it is necessary to consider the
conditions when applying them to SOEs under Vietnamese law.
Because there may be incompatible recommendations then it requires
flexibility during the application process.
4.3.4. Strictly applying sanctions to ensure the punishment
by law: The reason for this problem is that the implementation of it
for private sector enterprises is not difficult but for SOEs is a big
challenge because of its peculiarity. SOEs are familiar with the
priority and depend on the administrative management of the State
and the owner. Therefore, the privilege and cumbersome
administrative relationships of SOEs with state management
agencies, between related interest groups ... greatly affect the
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