Foreigners eye bigger SOE stake

Tran Tien Cuong, head of SOEs management section under the Central Institute of Economic Management (CIEM), said a plan being drafted by CIEM would offer more investment options for foreign investors in Vietnam.
The plan is to replace current regulations on the assignment, sale, contracting and leasing of SOEs, a move aimed at speeding up SOE transformation.
The government is fast-tracking the restructuring of SOEs in the hope of cutting their numbers from 4000 to 1000 by 2007.
“Foreign investors may be allowed to buy SOEs, which would bring about new professional management methods if the government approves the plan,” said Cuong.
He said most of the equitised SOEs in which foreigners already held small stakes were “performing well”.
However, Cuong said overseas investors should follow the current rules on the 30 per cent ceiling for foreign ownership of a domestic enterprise’s equity. He suggested foreigners form joint ventures with Vietnamese partners to buy the enterprises.
It is not clear whether SOE sales would be conducted by auction or by agreement, the latter of which would involve negotiations between the seller (the state, with the Ministry of Finance as representative) and the buyer(s).
Hoang Manh Thang, senior analyst from Dragon Capital, said the new plan “could offer more investment profiles to foreign investors in Vietnam’s market”.
He noted that foreign investors currently are only permitted to purchase stakes in equitised SOEs, while hindrances remain on indirect investments.
They are also prohibited from participating in certain sectors.
Thang said the draft regulation permitting foreign investors to purchase SOEs would expand business opportunities for foreign investors who intend to set up subsidiaries from a parent enterprise.
An increase in the number of SOEs to be subject for ASCL (assignment, sale, contracting and leasing) had also been proposed in a bid to give investors more choice.
Currently, only SOEs with less than VND5 billion ($330,000) in chartered capital are available for ASCL, whereas under the draft plan, any SOE that cannot be equitised would be sold.
Thang said foreign investors preferred purchasing stakes at equitised SOEs, but noted that “the percentage of stakes in equitised SOEs sold to outside shareholders is presently very small at about 5 per cent.”
He added that several foreign investors cannot purchase stakes in equitised SOEs, especially those operating efficiently and effectively.
Le Dang Doanh, advisor to the planning and investment minister, said the investment environment was being improved to draw foreign investors.
The government is considering increasing the maximum percentage that foreign investors would be permitted to purchase, he said.
“The scope of SOEs’ business activities will be broadened to include sale to foreign investors,” Doanh said, adding that even sectors considered sensitive, such as services, and banking and finance, will be reviewed.
Two weeks ago, the government issued a decree on the new establishment, reorganisation and dissolution of SOEs, restricting to 24 the number of sectors in which new SOEs can be established.
New SOEs are required to have minimum chartered capital of VND30 billion ($1.96 million), and large-sized corporations VND500 billion ($33 million).