Vietnam’s ratification of the CPTPP and the EVFTA compels the country to liberalize the state sector.

Bao Viet Insurance is due to divest state capital this year

The government is taking financial investment promotion in overseas markets and improving legal regulations to facilitate cross-border deals with the aim to boost the divestment from state-owned enterprises (SOEs).

According to Chairman of State Capital Investment Corporation Nguyen Duc Chi, the corporation is scheduled to privatize five state-owned enterprises (SOEs) and divest from 132 others by 2020 based on plans approved by Prime Minister Nguyen Xuan Phuc.

In the near future, SCIC will continue our divestment plans at FPT, Bao Viet Insurance, Bao Minh Insurance, Sa Giang Export & Import JSC, Tien Phong Plastics and Domesco Medical Export & Import JSC, Chi said, adding there are many lucrative and fast-growing businesses on the list as SCIC also hopes to collaborate with foreign investors in several key projects in Vietnam’s development strategy, such as infrastructure, healthcare, telecommunications and IT, energy and mining.

 To boost the sale, Finance Minister Dinh Tien Dung is leading a delegation to the UK’s London to organize a financial investment promotion conference there in a move to provide European investors with more information about investment opportunities in Vietnamese firms.

 Authorities have been also streamlining the legal framework to ease the inflows of foreign capital into Vietnamese firms.

 Chi revealed that the government will launch the book-building method soon, which is closer to international practices and ensures fairer pricing for investors.

 To facilitate foreign investors, the government has so far allowed them to pay their deposits in US dollars as opposed to VND as before, and the transaction can be carried out at all approved banks.

 Investors now also don’t have to make a public bid, and they are also allowed to submit the trading number within 15 days after the transaction date.

 Big push needed

 The government’s move was seen when the country’s privatization and divestment progress has fallen short of the target amid the country’s commitments to liberalize the state sector under free trade deals including the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA).

 According to the target set by the prime minister, the state had been tasked with divesting from more than 400 SOEs over 2017-2020. In 2018 alone, the state should have divested capital from 181 enterprises, followed by 62 enterprises in 2019.

 However, the finance ministry said the privatization of the country’s SOEs remains slow, failing to meet the plans as directed by the prime minister with only two SOEs having their share sale plans approved with total value of VND295 billion (US$12.68 million) in the first half of 2019.

 From 2016 to April 2019, 161 SOEs had share selling plans approved with total value of VND442 trillion (US$19.11 billion), including VND206 trillion (US$8.9 billion) of state capital, a finance ministry official he said, adding the remaining number of SOEs that must be sold is 97, accounting for 76 percent of the assigned plan.

 Meanwhile, Rajiv Biswas, Asia Pacific chief economist at global information provider IHS Markit in Singapore, told the media that Vietnam’s ratification of the CPTPP and the EVFTA compels the country to liberalize the state sector.

 Over the next decade, a gradual transformation and more competition for the state sector are expected in Vietnam because as these are the terms committed of the trade agreements, Biswas noted.

 In order to help reach divestment targets in 2020, the government has so far required ministries, branches and localities to instruct SOEs to accelerate the divestment process.

 However, experts also said the government should increase foreign ownership cap at Vietnamese firms as foreign investors often wish to buy a larger amount of shares in the firms.