Opportunities and Challenges for Foreign Investors following Equitisation Plans in Vietnam

Posted 15.12. 2019 by Cekindo

Vietnam has been attracting enthusiastic foreign investors from all over the world, especially those from Korea, Japan, Singapore, Thailand, and other ASEAN countries. Investments in equitised state-owned enterprises (SOEs) have also been favored by these investors who look to invest in Vietnam over the years

Therefore, in an effort to accelerate Vietnam’s equitisation and divestment policies, the Prime Minister of Vietnam has approved a new list of SOEs that will be equitised in 2020 under the Decision 26/2019. There are 93 new SOEs to be equitised in 2020 in this list, along with another 406 SOEs that will be equitised by the end of 2019.

In this article, we will talk more about the equitisation plans and what impact they will have on foreign investors looking to invest in Vietnam.

SOEs in 2020

These new SOEs are from different sectors including forestry and agriculture. The most noteworthy ones are Vinacomin, Agribank, Mineral One Member, and Vietnam Northern Food. The government will hold at least 65% of charter capital of these four major SOEs in 2020.

In addition to the four enterprises, other divestments next year include a minimum of 35% in MobiFone, Vinachem and VNPT; and 50% in EVN Genco 1 and EVN Genco 2 of the energy and electricity sector.

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Opportunities for Strategic Foreign Investors looking to Invest in Vietnam

The state divestment process presents potential opportunities investors because the government divestment plans also include large corporations and banks. Foreign investors may want to invest in large forestry and agriculture corporations when they start their divestment process, because of the competitive advantages in these sectors, such as low cost of labour and workforce, stable political climate and favorable market scale and growth.

Apart from those mentioned industries, foreign investors can also set their eyes on hospitality or tourism-related SOEs that are large and highly lucrative. The new SOEs in the tourism sector are Ben Thanh Group, Hanoitourist and Saigontourist. These three giant businesses have a series of luxury hotels in Vietnam, allowing investors to tap in to real estate and property market in the country as well.

SOEs Sale Regulations

In order to build a healthy and positive investment ambiance for foreign investors, the Vietnamese government has been putting an effort to bolster different aspects of state corporations in terms of monitoring, supervision, and accountability.

The Ministry of Finance issued Circular 21/2019 earlier to regulate the sale of SOEs, particularly the sale of SOEs to foreigners. These supportive rules lay out the book building framework with the process of which an underwriter decides the initial public offering price.

Circular 2/2019 allows investors to gain insights of the purchasing power and market interest before they proceed with the SOEs transaction. This regulation is extremely helpful for auctions with foreign investors’ participation as it makes the first enterprise public sales significantly more effective and efficient.

In addition to Circular 2/2019, Circular 3/2019 was also enacted in May 2019 to ease the SOEs investments for foreigners. According to this circular, when foreigners register for SOE auctions they are now allowed to make deposits in foreign currencies.

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