Vietnam's state companies fall far behind divestment target

By Hong Suong-Tran Tam, Thanh Nien News

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A file photo of a bank in Hanoi. Banking is among five sectors which state-owned enterprises have been ordered to divest from. Photo: Hong Suong A file photo of a bank in Hanoi. Banking is among five sectors which state-owned enterprises have been ordered to divest from. Photo: Hong Suong

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The lack of transparency and effective pricing strategies has stalled many state-owned enterprises' plans to divest from five sectors deemed risky by the government.
Over the past two years SOEs have sold more than VND8 trillion (US$353.65 million) worth of shares in businesses in the sectors of securities, finance and banking, insurance, real estate and venture funds, according to official figures.
It was equivalent to 32 percent of the VND25 trillion ($1.1 billion) divestment target the government set for the 2014-15 period as part of its efforts to restructure the economy.
Vietnam's SOEs started divesting from these sectors in 2012 and managed to sell more than VND1.2 trillion worth of shares as of the end of 2013. 
Speaking to Thanh Nien, Huynh Anh Tuan, CEO of SJC Securities Company, blamed the sluggish divestment process on the SOEs themselves.
Many businesses did not present decent financial reports, which was "a challenge" for prospective investors, Tuan said.
Nguyen Xuan Thanh, a lecturer for the Ho Chi Minh City-based Fulbright Economics Teaching Program, also pointed out that problems lied with SOEs that refused to lower their shares' prices to attract investors, although the government allowed them to sell the shares at low prices to speed up the process.
Businesses often insisted on offering their shares at the minimal price of VND10,000 (44 cents), while most stocks on the market were much cheaper, Thanh said.
The economist said some SOE executives were afraid of being held responsible for losses in the divestment process.
It is unlikely that SOEs will be able to meet the divestment target in the last two months of the year, said Phan Dung Khanh, investment advisory chief at Maybank Kim Eng Securities Limited.
The government needs to introduce new policies which can enable foreign investors to engage more in the process, Khanh said.
In June, Vietnam's government issued a decree allowing foreign investors to buy up to 100 percent at many listed companies, instead of being limited to 49 percent like previously.

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