36.2 percent and maximum of 92.4 percent over the seven years observed. EVN’s recent credit rating should enable NPC to make further progress to improve its own creditworthiness.

**Table 5: Summary of Financial Indicators for Vietnam’s NPC against sample average**

||**NPC**<br>**(Vietnam)**|**15 country**<br>**sample**<br>**average***|
|---|---|---|
|Net profit (loss) margin|-0.02%|-13%|
|Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)margin|1.5%|4%|
|External Financing Index Ratio|0.522|6.90|
|Investment as a percent of revenues|14%|18%|
|Average borrowing rate|4%|7%|
|Government transfers as percentage of utility revenue|0%|5%|
|Needed investments covered by operating revenue (net operating expenses)|9%|49%|

*Includes select utilities from Tanzania, Senegal, Peru, Colombia, Pakistan, the Philippines, Vietnam, Kenya, Uganda, Tajikistan, the Indian states of Rajasthan, Odisha, and Andhra Pradesh, Egypt, and Ukraine

Source: World Bank staff for Rethinking Power Sector Reform project

# _3.3.2 Institutions_

# **EVN and its subsidiaries maintain strong state linkages through their legal structure and corporate**

**governance, with limited autonomy.** As noted previously, EVN is as a fully state-owned enterprise group that dominates each part of the electricity sector value chain. It has a majority share of Vietnam’s power generation capacity (61 percent of capacity as of 2018). It also owns and operates the electricity transmission and distribution network through subsidiaries. The Government of Vietnam appoints EVN’s board and senior management and directs investments. PCs are organized as one-member limited liability companies wholly-owned by EVN. They have no Board of Directors, and instead have a Management Board comprising the Chief Executive Officer and four Directors-General and a full-time controller reporting directly to EVN. Members of the subsidiaries’ management boards are drawn exclusively from EVN management, with appointments made centrally. The management boards make few decisions autonomously. Rather, they carry out functions as determined and directed by EVN. As such, the current governance arrangements leave responsibility for management and control of both EVN and its subsidiaries largely in the hands of EVN headquarters.

**Management practices in EVN, as for other organizations in Vietnam, have roots in specific aspects**

**of the country’s society and culture.** A thesis by Tham (2012) examines EVN’s corporate culture in the context of reforms and identifies attributes of agricultural Confucianism and Socialist central planning, with emphasis on hierarchy, stability, collectivity, and interpersonal relations. Clear superiorsubordinate relationships mean that "obedience from lower levels is expected in all circumstances”. Obedience may thus be a key motivation for implementing units to follow government plans. Corporate-level performance, as for other SOEs, tends to be assessed on end contract targets rather than maximizing profits or productivity. For employees, evaluation tends to be informal and at the level of teams rather than individuals, underpinned by trust developed through socialization prior to and during employment. This approach mitigates the risk of disagreements or loss of face that could result from relying on formal monitoring of with objective indicators of individual performance. A performance-based salary incentive for individuals is "not popular since it neither matches the purpose nor goal of collective orientation”. When reforms create ambiguity for workers, EVN has

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