While the government has struggled to divest capital from many large state-owned enterprises (SOE), private businesses have found it easier to sell their stake.
Vincom Retail raised around US$700 million in an IPO last year
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Vincom Retail, the shopping mall subsidiary of Vingroup, Vietnam’s largest private conglomerate, made an IPO last year, raising around US$700 million.
Private lender Techcombank has also succeeded in receiving an investment of nearly US$1 billion from foreign investors, of which over US$370 million came from leading global private equity firm Warburg Pincus. As the pre-eminent private equity investor in Vietnam, this transaction brought Warburg Pincus’ total investment in Vietnam to over US$1 billion.
Vinhomes Joint Stock Company, the residential property development unit of Vingroup, has also raised about US$1.35 billion from foreign investors.
However, the successful deals of private enterprises have been in contrast with the sluggish in the country’s SOE divestment. Reports from the Ministry of Finance showed the divestment process for SOEs has lagged behind schedule. Under the SOE divestment plan approved in 2017 by Prime Minister Nguyen Xuan Phuc for 2017-2020, the government had to offload its stakes in 316 SOEs during 2017-2018, but it has only done so in 31 firms.
Some IPOs of large SOEs, such as Vietnam National Shipping Lines (Vinalines), Power Generation Corporation 3 (Genco 3) and Vietnam Rubber Group, received little attention from investors.
Vinalines, Vietnam’s largest state-owned shipping firm and port operator, for example, sought to sell 488.82 million shares, a 34.8 percent stake, and raise around US$210 million. But it only managed to book a meager VND54.3 billion (US$2.33 million) through an IPO.
Meanwhile, many others, such as Vietnam National Petroleum Group (Petrolimex) and Vietnam Television Cable Corporation (VTVCab), had to ask for delays or cancellations of their divestment plans. Petrolimex asked the government’s permission to change its share selling plan to 2019-2020 from 2018 as the market share price is lower than expected and due to market volatility.
Some SOEs, such as Vietnam Steel Corporation, Vietnam Pharmaceutical Corporation, Vietnam Industrial Machines and Equipment, and Hanoi Construction Corporation, even have so far had no signs of preparing for the divestment.
More transparence needed
It is not a case of investors no longer being interested in Vietnam: it is just that they find private firms much more attractive, experts said.
Ruchir Desai, a senior investment analyst at fund management company Asia Frontier Capital Ltd., said that IPOs of private companies in Vietnam performed well because there was more transparency in the process, management meetings, prospectus and book-building process.
Andy Ho, chief investment officer of VinaCapital, suggested that continued legislative reforms that make the privatization of SOEs more efficient should enable the government to achieve its goals faster.
These legislative reforms should also consider aligning the interests of various stakeholders to accelerate the pace, he said.
Besides, experts said SOE divestment encountered many obstacles, notably the influence of interest groups and difficulties in the search for consultants, enterprise evaluations and approval of land use plans and complicated pre-divestment auditing processes of big corporations.
Nguyen Hong Long, deputy head of the Steering Committee for Enterprise Renovation and Development, said that authorities need to strengthen inspection and supervision, as well as sanction leaders for delaying SOEs. It is also necessary to revise the list of SOEs awaiting privatization and divestment, and urge them to follow the plan.
