Academic journal article Journal of International Business Research

Financial Performance of Privatized State-Owned Enterprises (SOEs) in Vietnam

Academic journal article Journal of International Business Research

Financial Performance of Privatized State-Owned Enterprises (SOEs) in Vietnam

Article excerpt


Since the late 1970s a substantial body of literature calling into question the performance of the government sector has developed. Though this body of work has expanded to vast proportions, some common themes visible include the complaint that the government sector suffers from unclearly defined objectives, inefficient and ineffective policy implementation processes and is excessive in size relative to its economic setting. Further criticisms typically relate to the suggested existence of costly and overly bureaucratic organizational structures, low levels of responsiveness to citizens and a consequent failure to provide either an appropriate quantity or (as the case may be) quality of goods and services to taxpayers (Osborne and Gaebler 1992; Jones and Donald 2003).

Reformist oriented public management literature often links service and organizational sustainability deficiencies with macro level economic difficulties including persistent government sector budget deficits because of excessive costs and spending compared to poorly structured and inappropriately spread taxation bases. (Osborne and Gaebler 1992; Pollitt and Bouckaert 2004).

Many of the sentiments expressed in this body of literature were echoed in the policy settings adopted by reformist governments, most notably those in the United Kingdom, New Zealand and Australia (Carlin 2003; Carlin 2004). Consequently substantial changes in public sector management have emerged since the 1980s with various techniques, including contracting out, commercialization, corporatization, privatization used as a basis for improving cost effectiveness and efficiency in government.

Of these techniques, privatization has been perhaps most consistently employed throughout the world, often under conditions of considerable controversy. Privatization is the process through which governments either wholly or partly sell their interests in state-owned enterprises (SOEs) to private sector investors in the hope that the inefficient performance of these firms can be improved by the application of the discipline associated with private ownership (Megginson, Nash et al. 1994; Brada 1996; Megginson 2000; Megginson and Netter 2001).

Having initially been viewed as a radical, perhaps even desperate policy initiative of the most closely associated with the Thatcher government in Britain from 1979 onwards, privatization has come to be accepted as a potential instrument of economic policy for governments of many persuasions throughout the world. Indeed, the increasing tendency towards the use of this technique shows no sign of slackening in the 21st century (D'souza and Megginson 1999; Megginson and Netter 2001).

Understandably, given the widespread application of privatization as a tool of public policy and the high degree of materiality (in dollar and GDP proportionate terms) of many programs of privatization, the phenomenon has attracted considerable attention from researchers. Some of the work which has resulted from this attention has been empirical in its basis, with a particular focus on the performance implications of a switch from public to private ownership modes.

Despite considerable growth in the volume of extant scholarly literature focused on the question of the impact of management reform in the public sector, comparatively little is known about the impact of such initiatives in the developing world, particularly in instances where sweeping public financial management reform programs are of relatively recent origin.

Vietnam represents a case in point. Only in the post millennium period has the embrace of market based solutions been a significant phenomenon, made more interesting by the continued presence of a one party political system still nominally socialist in its focus. Consequently, this paper contributes to the literature by providing insights into the financial performance and position of a group of former state owned enterprises both before and after their transition to private ownership and listed company status. …

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