Local government agencies let 143 state-owned enterprises (SOEs) go public in 2014 and 94 in the first three quarters of this year, far from reaching the initial target of equitizing 432 companies in the 2014-2015 period.
The government has removed legal bottlenecks to the privatization process of SOEs, but foreign and domestic investors are somehow reluctant to buy shares, said Dang Quyet Tien, deputy general director of the Corporate Finance Department under the Ministry of Finance.
“Overseas investors have advanced interest but not many of them have sealed deals because they are concerned about transparency of information,” Mr. Tien told press late on October 9, referring to the reliability of data provided by SOEs.
Mr. Tien also pointed out the indecisiveness of SOES’ officials as they fear losing their positions or wrongdoings would be exposed.
The supreme objective of the privatization process is to change the mindset of post-equitization governance. “Equitized companies must accept changes in personnel, market rules and listing on local bourses”, Mr. Tien stressed.
The government will offer some 200 trillion dong or 10 billion USD worth of shares of state firms in the time to come and needs deeper involvement of foreign investors, Pham Viet Muon, deputy head of the SOE equitization steering committee, said at a Euromoney-held business event in Hanoi on September 30.
Minister and Head of the Government Office Nguyen Van Nen said on September 1 after a regular cabinet meeting that the equitization program is unlikely to reach the target this year as 89 firms may fail to go public due to diverse reasons. The government, however, would not implement the equitization program at all costs and would take prudent steps to avoid mistakes, the minister noted.
The Asian Development Bank (ADB) said in a report last month that the Vietnamese government’s target to sell shares in 228 SOEs this year looks ambitious, and many of these exercises are expected to take place later, in 2016 and beyond.
One obstacle is a lack of strategic investors willing to participate in initial public offerings of shares, the Manila-based bank said in the report. The easing of foreign ownership restrictions on companies listed on the stock market aims to address this shortcoming, though foreign investors may still be discouraged by concerns over corporate governance and financial transparency.
The World Bank said in July that the equitization process slowed down somewhat during 2015, suggesting that the annual target of 219 SOEs many not be feasible this year. “In addition to complex procedural requirements, implementation of equitization is also hampered by subdued demand for some of the assets, especially for non-controlling shares in SOEs,” the World Bank pointed out.