VietNamNet Bridge – Foreign investors’ indifference to Vietnamese state-owned enterprises’ (SOEs) initial public offerings (IPOs) is feared to hinder the plan to equitize 432 SOEs in 2015.

The IPOs of Vinatex (textile and garment), Ca Mau Fertilizer, Ben Thanh Tourist and Vietnam Airlines in late 2014 were reported as “successful”. However, analysts pointed out that of the Vietnam Airlines share buyers, there was no big foreign investor.

They noted that while the recent SOEs’ IPOs attracted Vietnamese tycoons, they seemed to be unattractive to foreign investors.

The huge debts incurred by SOEs are one of the major reasons which has caused investors to shrink back. A report of the Ministry of Finance presented at the latest National Assembly’s session showed that the total accounts payable of state-owned economic groups and general corporations by the end of 2013 had exceeded VND1,500 trillion.

The ratio of debt on equity had reached 1.45 on average and 3 for some enterprises, which means that they are under tough pressure for debt payment.

Meanwhile, the SOEs’ business performance has not made any considerable improvement since 2008.

In 2012, the Song Da Construction Group and the Vietnam Housing and Urban Development Group were “degraded” into general corporations after they took big losses. Most recently, many problems have been found by government inspectors at the Vietnam Rubber Group.

The biggest SOEs are operating in specific business fields, such as natural resource exploitation (oil and gas, coal), industrial crops (rubber, rice) and fields where the state holds a monopoly (electricity).

Meanwhile, oil and gas companies have been warned that 2015 would be a tough year for them. The crude oil price has fallen to below $60 per barrel, a 5-year low. While the world’s oil demand is believed to decrease in 2015, OPEC countries do not intend to cut exploitation output.

The continued oil price fall will surely affect the business performance of PetroVietnam, the national oil and gas group. PetroVietnam is now the biggest debtor among SOEs.

Meanwhile, coal miners, cement and rubber manufacturers and rice exporters will also meet big difficulties ahead as product prices in the world market are on the downturn.

According to a report in the Economist, the total assets of SOEs in the world’s 500 largest businesses have been increasing more rapidly than profit growth. The ROE (return on equity) of the enterprises has decreased significantly from 16 percent in 2007 to 12 percent, which is lower than that of the private economic sector.

Analysts believe that the investors’ disappointment about state-owned enterprises worldwide could be a reason behind their chilly attitude towards Vietnamese SOE IPOs.

Kim Chi