Although the Government is stepping up the transfer of shares of large firms, foreign investors’ involvement in the process is below expectations. The slow pace of selling shares to foreign investors is seen even among attractive SOEs such as Hanoi Beer, Alcohol and Beverages Corporation (Habeco), Saigon Beer, Alcohol and Beverages Corporation (Sabeco), Vietnam Dairy Products JSC (Vinamilk), and Binh Son Refining and Petrochemical Co Ltd (BSR) - the operator of Dung Quat Oil Refinery.

According to a report by the Central Institute for Economic Management (CIEM) released last week, Vietnam Airlines was able to sell 8.77% of its shares to Japan’s air carrier ANA at VND2.4 trillion (US$105.42 million) after three years of negotiations. The share sale was deemed successful since the national flag carrier had employed prestigious foreign book runners, set its value in line with international regulations, prepared transparent equitization documents, launched electronic data system called Dataroom for investors and provided investment incentives for shareholders.

CIEM concluded that enterprises should negotiate patiently and balance their benefits and shareholders’.

A report by the State Securities Commission of Vietnam showed the target of divesting State stakes in SOEs and attracting private investment has not been reached. The State still holds a staggering 81% of shares at SOEs, while private investors hold only 10% and strategic investors 7.3% compared to the planned 16.7% and 15.8% respectively.

CIEM had surveyed 46 SOEs approved for equitization in 2011-2016 and found that only VND12.8 trillion worth of shares had been sold to strategic investors compared to VND28.37 trillion worth of stakes approved for sale to such investors.

International investors are still not interested in Vietnamese SOEs’ equitization due to a small number of shares offered for them. Only six out of 46 SOEs offered international investors over 50% of ownership and five of them have sold out such stakes.

Foreign investors hesitate to acquire shares of SOEs due to ownership limitation, irrational corporate and share valuation, lack of transparency, and complicated procedures.

Foreign shareholders cannot hold stakes of more than 49% in SOEs as stated in Decree 60/2015/ND-CP. State enterprises in fishery- and shipping-related services set even lower foreign ownership rates, at 40% and 30% respectively.

Investors also expressed concerns over SOEs’ profitability. Although the average return on equity (ROE) of SOEs ranged from 15% to 17%, higher than that of the private sector, but much of the profit is concentrated in a few groups like Vietnam Oil and Gas Group (PVN) and military-run telecom group Viettel, which altogether accounted for 72.4% of total profits of 12 biggest groups in 2014.

Meanwhile, most of SOEs reported ROE of under 10% and some of them even suffered losses and faced insolvency.

SGT