Fear of divestment losses slows Vietnam state sector reforms

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Structural reforms in the public sector are not happening at any great pace since state-owned enterprises are reluctant to divest from non-core businesses for fear of making losses in the process. 

Firms face "numerous difficulties" in selling their shares, the Ministry of Planning and Investment said.

Minister Bui Quang Vinh said SOEs fear being held responsible for losses while selling out, calling it the most "costly" reason for the sluggish pace of privatization.

Power distributor EVN and telecom group VNPT have been unable to sell their stakes respectively in ABBank and Maritime Bank since they want the original prices they paid for them though equity markets are down now.

Textile and garment group Vinatex has managed to exit five non-core businesses and plans to sell its stakes in nine more by year-end. It has another 23 such businesses.

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Since the government began a five-year reform plan in 2011, it has approved restructure plans by 68 out of the country's 100-odd state-owned firms.

As of the beginning of this year 100 percent state-owned firms alone had invested around VND21 trillion (US$996.1 million) in non-core businesses, official data showed.

A draft circular issued by the Ministry of Finance in July requires SOEs making disinvestment losses to explain to the ministry and mandates pay cuts for senior executives.

Nguyen Dinh Cung, deputy director of the Central Institute for Economic Management, said he doubted any firm whose share prices have fallen would sell out.

Economist Pham Chi Lan said the government should not let firms wait until the stock market recovers to divest.

SOEs may have to sell their shares at "slightly" lower than original prices, but it would enable the government, whose revenues are under pressure, to use the money for other public projects rather than let it remain stuck in ineffective businesses, she added.

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