Vietnam revamps share-sale rules in bid to boost privatization

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Vietnam began implementing reworked guidelines for valuing state-owned enterprises Wednesday in a bid to revive its privatization program.

As part of the changes the government will no longer provide capital to bolster companies ahead of a share sale when liabilities exceed assets, Tran Huu Tien, director of corporate finance at the Vietnamese finance ministry, said by telephone.

The rules will help clear up technical issues in evaluating companies and show "that the government is quite determined," he said.

The ruling Communist Party is trying to boost its more than decade-old share-sale program known as equitization, saying in December that "unprofitable or even money-losing" companies had become a burden. Party officials in October set the restructuring of state-owned companies as one of three areas of focus for the government through 2015.

"This circular sets out very detailed guidance on how the government would value an enterprise that it puts up for sale, for how you would carry out the calculations," Simon Taylor, a Hanoi-based special counsel at the law firm Baker & McKenzie (Vietnam) Ltd., said by telephone Wednesday. "There was a decree issued on equitization last July and since then companies have been waiting for this circular in order to move forward with the valuation process."

Vietnam Airlines Corp., the country's flagship carrier, said last year it expects to hire a foreign bank to work on a planned initial public offering, while the online newswire VnEconomy reported a year ago that Vietnam Mobile Telecom Services Co. faced pressure to sell shares after delays.

"With inflation slowing down, liquidity issues should ease this year, and that means chances for a stock-market recovery are better, which gives the government leeway to do share sales at a good price," Juerg Vontobel, founder of the U.K.-listed Vietnam Holding Ltd. fund, said in a telephone interview from Zurich, Switzerland.

In Vietnam, initial public offerings precede a listing on one of the country's two stock markets. The VN-Index on the Ho Chi Minh City Stock Exchange, the nation's biggest bourse, jumped 10 percent in January.

"We have seen in past equitizations that investors that bid in the share sale take their cue from the direction of the stock market," Vontobel said. "So with the timing playing into the government's hands, the chances of the process moving forward are probably greater than in the past." 

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