Divestments for Billions of Dollars

The Ministry of Industry and Trade of Vietnam reportedly is carrying out equitisation plans for four wholly State-owned enterprises (SOEs) as guided by the Prime Minister. The targets SOEs include Vietnam Engine and Agricultural Machinery Corporation (VEAM) and Machines and Industrial Equipment Corporation (MIE). As for Vietnam Paper Corporation (VINAPACO), the ministry submitted the equitisation plan and awaited the approval. Regarding BMC Co., Ltd, the authority is carrying out corporate valuation for equitisation. With respect to Vietnam National Tobacco Corporation (Vinataba), the Ministry of Industry and Trade is making and reporting equitisation plan as guided by the Prime Minister.

 

Electricity of Vietnam Group (EVN) completed divestments and stockholding reductions. Vietnam Chemical Group (Vinachem) finalised divestments in 13 out of 17 companies and all investments in noncore business fields brought in profits. Vinataba finished equitisation in Vietcombank and Saporo Vietnam Co., Ltd, taking over VND306 billion of proceeds.

 

A representative from the Ministry of Industry and Trade said Hanoi Beer Alcohol Beverage JSC (Habeco) will sell the entirety of State-owned stake (81.79 per cent), equivalent to VND9 trillion in 2016. Saigon Beer Alcohol Beverage JSC (Sabeco) will perform two rounds of divestment, with 53.5 per cent of stake to be sold in the first phase (equivalent to VND24 trillion) in 2016 and 36 per cent of stake to be sold in the second phase (equivalent to VND16 trillion) in 2017. Sabeco will be listed on the local bourse after it completes equitisation.

 

Dr Vu Dinh Anh, an economic expert, said the State divestment got stuck because of unclear definition of State roles in the economy after SOEs going public. He said, making the excuse of fearing the loss of State brand names after being equitised is unacceptable. Interests with administering ministries are major cause of getting stuck in equitisation in Sabeco and Habeco.

 

Indeed, investors have no reason to drop such brand names as Vinamilk, Sabeco and Habeco after they buy into them. “The State needs determination to step up divestment and needs reasonable measures to protect national brands,” he analysed.

 

Mr Nguyen Hoang Hai, Vice Chairman of the Vietnam Association of Financial Investors (VAFI), said that the managements of many State-owned companies are not eager to carry out equitisation. The brake on the equitisation of SOEs administered by the Ministry of Industry and Trade like Vietnam Steel Corporation (VNSteel), Vinachem and Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin) is that their financial positions are much weaker than 10 years ago. Although they are parent companies, they cannot save or finance their subsidiaries like Ninh Binh Urea, Ha Bac Urea, Thai Nguyen Iron and Steel Company.

 

He noted that the initial public offering (IPO) of State-controlled companies will end in one of the two following scenarios: They cannot sell or sell very few shares because they operate ineffectively; or on contrary, they sell a lot of shares at much lower prices than on the stock market, usually 30 - 50 per cent lower.

 

“The complete selling of State stake in Sabeco and Habeco will bring in some US$3 billion, enough to build two urban railways in Hanoi. When Hanoi has four urban railways in the next seven years, it will have a lot of favourable conditions to develop public transportation system and reduce motorcycles in traffic,” Hai concluded.