VietNamNet Bridge - Decree No 60 allowing foreign investors to hold up to 100 percent of stake in Vietnamese businesses took effect in early September. However, foreign investors still are doubtful about its enforcement.

Bill Stoops, investment director of Dragon Capital, was delighted when Decree No 60 came out, because foreign investors now can hold a larger stake in Vietnamese enterprises.

Dragon Capital now has $1.15 billion worth of capital, 90 percent of which is addressed to enterprises. What Stoops wants to know is when and how the new regulation will be implemented.

In principle, the decree took effect on September 1. However, two more circulars from the Ministries of Finance and Planning & Investment will be needed to be sure the decree can be brought into life.

The former ministry has released Circular No 123 showing the procedures for enterprises to register foreign ownership ratios in the stock market. Meanwhile, the circular on foreign ownership ratios in different business fields has not come out yet.

Kevin Snowball, CEO of PXP Vietnam, an investment fund management company, believes that foreign investment banks and foreign funds targeting emerging markets may consider buying more shares in Vietnamese enterprises if they are allowed to. He also commented that if barriers are removed, Vietnam would be able to receive potential investors.

However, as investors have to wait for circulars for a long time, they will have doubts about the implementation of the government’s regulations.

Andy Ho, managing director of VinaCapital, noted that foreign investors want higher ownership ratios in state-owned enterprises which allow them to join the enterprises’ management boards. However, most large-scale state-owned enterprises have been selling shares in dribs and drabs, just 3-5 percent of stakes.

This is also believed one of the major reasons hindering enterprises’ equitization. The Bank for Investment and Development of Vietnam (BIDV) is a typical example. BIDV’s deputy CEO TranPhuong said the bank still had not found strategic partners, though it made IPO many months ago.

Similarly, Vietnam Airlines, the national flag air carrier, issued an IPO one year ago, but has not found strategic partners.

In fact, the absence of the list of business fields and corresponding foreign ownership ratios is not the only barrier. 

Even if the list is released, according to Sandeep Mahajan, chief economist of the World Bank in Vietnam, foreign investors who want to raise their ownership ratios in Vietnamese enterprises would still meet with difficulties reading businesses’ financial reports which do not follow international standards.

Adam McCarty from Mekong Economics in Hanoi noted that it could take decades to improve Vietnam’s accountancy standards.

DDDN