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Vietnam targets record year of stake sales in state companies

Monday, March 16, 2015 - 08:00
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Vietnam will offer to sell a record amount of shares in state-owned companies this year, with the government planning to publicize a list of assets available to accelerate a program that has repeatedly missed targets.

[HANOI] Vietnam will offer to sell a record amount of shares in state-owned companies this year, with the government planning to publicize a list of assets available to accelerate a program that has repeatedly missed targets.

"With about 280 companies, mostly large conglomerates on the list, this will be a record year for the value of state stakes to be sold," Dang Quyet Tien, deputy general director of the finance ministry's corporate finance department, said in an interview in Hanoi on March 13. "Making the list public with the size of stakes on offer will help attract more investors."

Vietnam is trying to quicken a share sale program that began in the 1990s as the government seeks to spur economic growth to a four-year high of 6.2 per cent this year. The complexities of the privatization process have hindered plans to overhaul inefficient state companies, whose borrowings have burdened the banking system with bad debt and strained lending.

"There's a genuine desire and effort from the government to speed up the process as much as possible, but delays are inevitable given that current laws make the privatization process rather lengthy from a procedural standpoint," said Michel Tosto, head of institutional sales at Viet Capital Securities in Ho Chi Minh City. "It's impossible for the government to achieve its privatization goals as originally planned."

The list of state-owned stake sales will be finalized this month and announced soon after, Tien said. The government's privatization plan last year fell short of its target, even as the number of companies that sold stakes doubled from 2013. In total, 143 state-owned companies sold shares in 2014, compared with a goal of 200.

To quicken the process, "they would need to simplify the privatization procedures. Too many people need to be involved in the process," said Tosto. "They need to modernize the IPO and listing procedures so that the two are simultaneous rather than months or years apart. Reasonable valuations would help." The stake-sale process will change this year, Tien said. Companies won't "necessarily have an IPO first, but need to find and sell shares to suitable strategic partners who can make long-term commitments for mutual growth, avoiding the situation where our companies could end up being taken over."

Prime Minister Nguyen Tan Dung has set the end of this year as the deadline for state enterprises to sell non-core investments and banks to reduce bad debt to below 3 per cent. Regulators last year said they would form a working group including officials from the finance ministry and Ho Chi Minh City and Hanoi stock exchanges to help state companies sell stakes more successfully.

The dong weakened 0.1 per cent to 21,390 against the US dollar at the close of trading last week. The benchmark VN Index of stocks fell 0.4 per cent on March 13.

Vietnam last year issued a regulation compelling state companies to list shares more quickly following their initial public offerings. It also requested State Capital Investment Corp, a government investment arm, to buy stakes in companies with failed IPOs to help quicken their restructuring.

State companies will be required to conduct roadshows abroad to reach out to foreign investors, Tien said. "Having companies become transparent will also help lure more investors," he said.

The government will sell more shares in Saigon Beer Alcohol Beverage Corp to cut its stake to 36 per cent from about 90 per cent, Thanh Nien newspaper reported last week. The company, known as Sabeco, is the country's biggest beer producer and hasn't listed on the stock exchange since its IPO in 2008. National carrier Vietnam Airlines Corp conducted its IPO in November after trying to sell shares since about 2008.

"Right now, the problem is the government doesn't know how to market the equitization," said Marc Djandji, head of institutional sales and brokerage at VPBank Securities Co. "They need to be able to attract investors, and to do that, they need to market the sales better."

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