State divestment slows down in Vietnam

By Bao Van, Thanh Nien News

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A file photo shows Vinamilk products on sale in Vietnam. Photo: Reuters A file photo shows Vinamilk products on sale in Vietnam. Photo: Reuters

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Despite the government’s determination to sell its stakes in 10 major companies, including dairy giant Vinamilk and information technology leader FPT, things are moving too slowly for frustrated investors, who are showing strong interest in Vietnam.
The State Capital Investment Corporation (SCIC), Vietnam’s sovereign fund, recently announced a list of 120 companies in which it would sell the government’s stakes worth more than VND6.3 trillion (US$278.06 million) this year.
But it includes only FPT and Sa Giang Import and Export Corporation of the major companies, in which SCIC holds 6 and 50 percent stakes.
Vinamilk, insurer Bao Minh Group, Binh Minh Plastic Joint-stock Company, and Vietnam Reinsurance Corporation are not in it. SCIC's stakes in them range from 37.1 to 50.7 percent.
"The SCIC will sell its stakes only when it has [identified] new investments that are more profitable," its chairman Nguyen Duc Chi said.
The fund's latest plan came less than two weeks after it and other shareholders of Vinamilk voted to scrap the 49 percent foreign ownership limit. The fund owns 45 percent of the dairy company, while foreign investors have already hit their limit with Singapore's F&N Dairy Investment holding 11 percent.
The SCIC move indicates that investors will have to continue waiting for a long time to buy into Vietnam’s best performing firms since it does not want to give up the big profits it earns from these businesses.
Vinamilk has consistently paid huge dividends over the years. The SCIC reportedly earned around VND5.06 trillion ($223.42 million) in dividends last year, more than 53 percent of it from Vinamilk.
In fact, plans to sell the government’s stakes in many firms have been delayed for years. Foreign investors are frustrated by the lack of progress after the government announced plans to dismantle foreign ownership limits in many sectors.
Many companies made initial public offerings many years ago but have yet to list on the stock market as required under the law.
They include brewers Sabeco and Habeco. Sabeco made an IPO in 2008, but does not even have a roadmap yet for reducing government ownership.
The government owns more than 89 percent of Sabeco, which controls more than half of Vietnam's beer market with its iconic Saigon brand.
Explaining the reason for the slowness in the divestment, Dang Quyet Tien, deputy head of the finance ministry’s corporate finance department, said selling the government’s stakes in 10 firms at the same time could affect prices and so it is necessary to consider "a suitable time" to sell the shares.
But the SCIC does not have detailed plans for the divestment.
Some economists said to get the best prices for their shares, the 10 firms should be widely marketed abroad.
Vietnam has experience selling abroad. To issue US$1 billion worth global sovereign bonds in 2014, the country hired three foreign lenders -- Deutsche Bank, HSBC, and Standard Chartered Bank -- to make a pitch to international investors.
Meetings were held with potential investors in Singapore, Hong Kong, London and three cities in the US. The banks organized road shows.
The more investors evince interest in the government’s divestment plans, the more likely the 10 firms’ shares will fetch high prices.
Vietnam is trying to speed up a share sale program that began in the 1990s as it seeks to spur economic growth to a four-year high of 6.2 percent this year.
Acceleration urged
Economist Pham Chi Lan said companies like Vinamilk and FPT have achieved successes thanks to having capable people in management and not because the state has continued to invest in them.
These firms are big enough to compete in the market and attract foreign investors, she said.
Giving SCIC a say in their running could in fact hinder them from making "daring" business decisions and seizing new opportunities because they would be bound by many rigid regulations, she said.
SCIC now has stakes in 197 companies that have a combined market value of nearly VND95.7 trillion ($4.22 billion), according to VnExpress.
Its holdings are equivalent to 23 percent of the companies' combined charter capital.
Bui Ngoc Son, another economist, said Vietnam would only have a genuine market economy when enterprises are totally privatized.
The state should stand back and collect taxes from them, instead of investing in them, he said.
Concurring, economist Le Dang Doanh said state enterprises could consider focusing only on vital industries like energy and security, and leave other businesses to the private sector.
For instance, it is not necessary for the country to have SOEs making garment and footwear since private companies are the ones that account for most of the exports, he added.

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