Vietnam to Miss SOE Privatization Target This Year: Report

Minh Tam

16:22 21/10/2015

BizLIVE - The Vietnamese government will fail to reach the goal of the equitization process of state-run firms this year.

Vietnam to Miss SOE Privatization Target This Year: Report

In November 2014, Vietnam Airlines raised around $51.3 million in an initial public offering planned since 2008.

Vietnam will sell shares in 200 state-owned enterprises (SOEs) this year, falling short of its initial target of 289 set for the year, according to a government report read on October 20 when the 10th National Assembly sitting started.
Government agencies have sold 232 million shares, or 36.1% of the 734 million shares worth 7.34 trillion dong ($326.2 million) put up for sale in the year to date.
State-owned conglomerates have booked proceeds of 12.8 trillion dong from divesting stakes in non-core businesses, soaring 149% year-on-year, and 47% higher than the book value.
As many as 465 SOEs have been restructured, of which 353 firms have gone public, the report says, without giving a time frame.
According to Dang Quyet Tien, Deputy director of the Corporate Finance Department under the Ministry of Finance, just 340 SOEs have been privatized as of September 2015, out of the 531 planned for the 2011-2015 period.
As many as 1,309 SOEs need restructuring in the five-year period, reducing the number of wholly state-owned companies to 600 at the end of 2015, Mr. Tien added.  
The official stressed that the government will have to step up the privatization process in the 2016-2020 period by turning equitized firms public, and making them list shares on local bourses.
He tipped that the government has turned a green light for its investment arm, State Capital Investment Corporation, to divest entirely from ten large companies including Vinamilk and FPT Corp, but SCIC will do it in a suitable timing to maximize earnings.
The Asian Development Bank 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, the bank said. 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.
To quicken the privatization process of SOEs and bolster the stock market, the government has taken a number of bold steps, including raising the foreign ownership cap in certain businesses, allowing large-batch share sales and making SOEs more transparent in information disclosure. 

The benchmark VN Index of the Ho Chi Minh Stock Exchange ended down 0.04% at 590.24 and has risen 8.17% so far this year, making it one of the best performers in Asia.