Six FIEs begin equitisation process

Taya, Interfoods, Austnam, Taicera, Tung Kuang and Royal International are the first batch of foreign-invested enterprises (FIEs) selected by the Ministry of Planning and Investment (MPI) from 12 applications submitted to the government for approval in July.
Equitisation of the six FIEs was approved by the government last week, which also asked the MPI to guide the successful applicants in completing other related documents and in their transformation into shareholding companies.
One applicant that failed to make the cut was the optic cable company Focal, which had less than three shareholders as required by the government.
Director of the MPI’s Foreign Investment Agency, Phan Huu Thang, said the ministry would inform the approved candidates as soon as possible so they could complete the transformation within six months, as stipulated by article 23 of Decree 38/2003/ND-CP, dated April 15, 2003.
“Applications from other FIEs that need to be transformed and meet government-set conditions will continue to be scrutinised and their applications will be submitted to the prime minister within the year,” Thang said.
According to a government letter (No 1325/CP-DMDN) issued on September 16, the prime minister has agreed to continue receiving FIE transformation applications throughout 2004. On December 29 last year, the MPI and the Ministry of Finance issued Circular 08/2003/TTLT-BKH-BTC detailing the implementation of Decree 38/2003/ND-CP on the trial transformation of FIEs into shareholding companies using foreign investment capital.
But the FIEs were only given until March 25 this year to submit their completed applications.
“Several FIEs failed to complete the required procedures on time, although they were very interested in the equitisation process,” Thang said. More page 4
Thang said the Foreign Investment Agency had instructed FIEs to complete application documents. Between 20 and 25 FIEs are expected to take part in the trial FIE equitisation, however only 12 applications were received.
“In several cases, the partners in the joint ventures have not reached a consensus on their transformation plans. In others, the legal capital has not been contributed sufficiently as required by Decree 38,” he said.
Dozens of FIEs wishing to be publicly listed have also failed to meet the tough set conditions, particularly those regulations involving the size of a company’s investments and the stipulation that the transfer of assets to the Vietnamese party on the termination of the FIEs be non-refundable.
Under Decree 38 and Circular 08, FIEs eligible for consideration must have registered investment capital of between $1 million and $70 million. FIEs will not be eligible for official consideration for transformation if their foreign partner or partners have pledged to transfer their assets to the Vietnamese State and their Vietnamese partners on a non-refundable basis.
The applications by Fortuna Hanoi Hotel and Vinausteel failed because of the non-refundable asset transfer stipulation, despite these companies having pursued the process for some time. They will now have to arrange negotiations between the Vietnamese and foreign partners to amend the asset transfer stipulation in their investment licences.
Under current Vietnamese law, foreign-invested companies only exist in the form of a limited liability company, so they are not allowed to issue shares to mobilise capital. Moreover, this also makes the life of investors difficult if one wants to withdraw its stake in the company, since it is often very hard to find an investor to take over their position in the company.