Vietnam state firms point out challenges in gov’t privatization plan

Managers of such firms were encouraged to tell the truth about what they think about privatization during a rare meeting the ministry held in Hanoi on Thursday, which in the end showed it is still a long way for the plan to become a success.

Even though 279 out of 299 of the ministry-run enterprises have gone public, there are still many problems that need solving, such as the small number of shares sold to investors during the privatization process.

According to the plan, the ministry, which manages the state holdings in the firms, will find investors for the government’s shares to improve performance for the businesses and increase their capital.

“However, there are firms that only managed to sell 0.07 percent of their stakes because few investors were interested,” Phan Dang Tuat, head of the ministry’s reform panel, admitted at the meeting.

“Other enterprises do not have proper archives of financial documents and papers, and there are executives who hesitated to have their companies privatized.”

Some enterprises only publicized unclear and inadequate information about their financial and operational state, so investors were not willing to open their wallets, Tuat added.

“There are also companies who encouraged their own managers and executives to acquire the shares to complete the privatization, and had no hope of attracting any outside shareholders,” he said.

The faults, however, are not always on the businesses’ side, the official noted.

“Businesses had to seek permission from higher authorities, but the response only came months thereafter,” he elaborated.

Tuat said most investors want to buy at least 51 percent of the firms to acquire the controlling stakes, to which the government would not agree.

“Investors always want to buy at least 51 percent because they prefer to take control of the companies, and we should seriously consider this,” Vo Thanh Ha, chairman of Sabeco, the country’s largest beverage maker, said at the meeting.

The government still holds an 89 percent stake in the Ho Chi Minh City-based company, the maker of such popular brands as 333 or Saigon Beer, after it went public in 2007.

According to an order by the trade ministry, Sabeco will have to sell the government’s shares two more times in the future to reduce the state holdings by 40-60 percent, Ha revealed.

“So what’s left for us when we sell the entire stake?” he wondered.

Ha added that it is not really necessary that a state company be able to improve performance following the privatization.

“Sabeco did report impressive growth eight years after going public, but its performance is largely due to the improved living standard and drinking habit of Vietnamese people, not privatization,” he said.

Government backs privatization plan

Nguyen Trong Dung, deputy head of the national board set up to oversee the reform of state firms, argued that the privatization plan has been doing businesses good.

“Some 4,000 firms in Vietnam have gone public and it has been proven that [privatization] is an effective solution,” he told the meeting.

Directly addressing the case of Sabeco, Dung admitted that the company would remain a strong player without having to go public, but “once privatized, its business performance will only become better.”

“Vinamilk, which went public in 2003, is generating some VND7 trillion [US$312.5 million] profit on an annual basis, something that could never be achieved if they did not undergo the privatization process,” he added.

The government currently owns 45.1 percent of Vinamilk, but revealed in October that it will sell the entire stake in the country’s largest dairy producer to rake in some $2.5 billion.

“The privatization plan means nothing if after all, the government still holds a share of 94 or 95 percent,” Minister of Industry and Trade Vu Huy Hoang said at the meeting.

The ministry will thus continue privatizing more firms in 2016, and will “hold forums to call for investment in enterprises that have already gone public such as Sabeco and the Hanoi Beer Alcohol and Beverage JSC,” the minister said.

Dung, of the state firm restructuring board, also said the government is poised to sell its shares in such big state enterprises as oil and gas giant PetroVietnam or power utility Vietnam Electricity, and will only retain a 65 percent stake there.

“Our vision is that there should be as few companies that are 100 percent owned by the government as possible,” Dung said.

“In the end there will be only two common state holding ratios: 51 percent and more than 65 percent.”