VietNamNet Bridge - Most state-owned enterprises (SOEs) operate in the pivotal business fields of the national economy. Therefore, experts say, Vietnam needs to be careful when choosing new owners for the enterprises.

SOEs told to divest non-core business fields, but let grass grow under feet

Nguyen Dai Thang, Economics & Management Faculty’s Dean of the Hanoi University of Technology, noted that Vietnam should keep a ‘policy of openness’, not ‘open completely wide’ policy when inviting foreign investors to buy state owned enterprises (SOEs).

Thang, while agreeing that it is necessary to attract foreign investors to speed up the SOEs equitization, warned that Vietnam will face high risks if it just tries to sell shares, but does not choose investors carefully. 

“Selling SOEs to get money is not the only purpose of the equitization,” he commented.

The economist believes that Vietnam should only attract foreign investors to business fields which Vietnam is weak at, while there is no need to call for foreign investment in fields in which Vietnam has an advantage.

Thang went on to say that it would be better to prioritize to sell shares to loyal investors such as the ones from Japan, South Korea and Singapore, and selling shares to Chinese investors is not encouraged.

“In foreign direct investment (FDI), Chinese investors are not highly appreciated because of small investment capital, quality and technology transfer,” he explained.

He noted that as for Chinese investors, ‘their deeds do not match their words’, that Chinese make investment not just for business purpose, but for many other purposes.

An analyst said he agrees with Thang that Chinese investors should not be welcomed because of the poor reputation Chinese have had in Vietnam in both foreign invested and ODA-funded (official development assistance) projects.

“Chinese technologies are low quality. A lot of projects implemented by Chinese contractors have problems,” he said.

Dr. Nguyen Tri Hieu, a renowned economist, commented that it would be better for Vietnam, a small emerging economy, to apply necessary measures to control foreign capital, and that there should be an independent supervisory agency under the National Assembly.

Hieu warned that it is nearly impossible to fulfill the plan on equitizing more than 400 SOEs this year because of many reasons, including the foreign investors’ hesitance and Vietnam’s low credit rating. Besides, if the US FED raises the prime interest rate as forecast, the move would prevent capital flow to Vietnam.

Therefore, instead of trying to equitize all the SOEs as planned, Vietnam should focus on equitization quality.

Hieu believes that Vietnam selling SOEs to Japan and South Korea, loyal investors who have sustainable relations with Vietnam would be the optimal choice for Vietnam at this moment. 

Meanwhile, it is necessary to be cautious when doing business with China.

Dat Viet