Opportunities and challenges in Vietnam for investors

Over the years, Vietnam has aimed to reduce its direct ownership in major state-owned companies and promote private ownership. Nevertheless, equity and divestment have not yet taken place as scheduled and have continued to face delays.

According to the Ministry of Finance (MoF), from 2016 to 2020, 180 state-owned enterprises (SOEs) were integrated. However, the list approved by the Prime Minister includes only 39 out of 127 institutions, which have met only 30 percent of the target. In 2021, three SOEs were integrated, but none was on the list approved by the Prime Minister.

Regarding the initial sale of shares, the total sale price was VND22.7 trillion (US $ 987 million), or 23 percent of the plan. For 2016-2020, the MoF said VND177.4 trillion was raised through investments, about 6.5 times the value of the book.

Last year, only three SOEs completed the privatization process, citing the difficult economic environment due to the protracted epidemic. It was estimated that 18 SOEs had during this period removed state capital worth VND4.4 trillion (US $ 192.4 million) for a combined book value of VND1.66 trillion (US $ 72.6 million).

Of the remaining SOEs required for privatization, Hanoi and Ho Chi Minh City accounted for 54 percent, with 13 in the capital and 38 in the southern centers of the country. Others include six committees overseen by the State Capital Management (CSCM), four under the Ministry of Industry and Commerce (MoIT), and two under the Ministry of Construction (MoC).

Most recently, on March 18, the Prime Minister signed a resolution aimed at deepening the restructuring of SOEs in 2021-2025, as well as the goal of completing the restructuring of SOEs by 2025.

Decision No. 360 / QĐ-TTg Improving SOE’s operational efficiency and competitiveness based on technology, innovation, and management capabilities. The move will facilitate further implementation, allocation and utilization of social resources during the development of state capital and resources in enterprises.

By 2025, Vietnam expects to complete the restructuring process of the SOE, which will use a minimum of US $ 10.84 billion.

The state investment process faces a number of challenges but can be an exciting opportunity for foreign investors, especially large banks and corporations.

For example, since large agricultural and forestry corporations are embarking on their investment projects, investors may consider investing in this sector considering Vietnam’s comparative advantage in this industry in terms of market scale and growth, low labor costs and stable political environment.

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This article was first produced by VietnamBriefing which is produced by Dejan Veins & Associates. The company supports foreign investors across Asia from the office Around the worldIncluding China, Hong Kong, Vietnam, Singapore, IndiaAnd Russia. Readers can write [email protected]

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