For years, Vietnam has aimed to reduce its direct ownership in key state companies and promote private ownership. Nevertheless, equitization and divestment have not yet taken place as scheduled and have experienced constant delays.

According to the Ministry of Finance (MoF), from 2016 to 2020, 180 state-owned enterprises (SOEs) were equitized. However, this included only 39 out of 128 enterprises on the list approved by the Prime Minister, meeting only 30 percent of the target. In 2021, three SOEs were equitized, but none were on the list approved by the Prime Minister.

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

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

Among the remaining SOEs that are required for privatization, those in Hanoi and Ho Chi Minh City make up 54 percent of the total, including 13 in the capital and 38 in the country’s southern hub. The others include six supervised by the Committee for State Capital Management (CSCM), four under the Ministry of Industry and Trade (MoIT), and two under the Ministry of Construction (MoC).

Most recently on March 18, the Prime Minister signed a decision to deepen the restructuring of SOEs in 2021-2025 as well as target the completion of restructuring SOEs by 2025.

Decision No 360/QĐ-TTg aims to improve the operational efficiency and competitiveness of SOEs on the basis of technology, innovation, and management capacity. The move will facilitate more effective mobilization, allocation, and use of social resources while developing state capital and assets at enterprises.

By 2025, Vietnam expects to complete the restructuring process of SOEs, for which a minimum of US$10.84 billion in proceeds will be used.

The state divestment process is faced with several challenges but could be an exciting opportunity for foreign investors, especially as large banks and corporations are also on the list of government divestment plans.

For example, as large agriculture and forestry corporations are beginning their divestment projects, investors may consider investing in these sectors considering Vietnam’s comparative advantage in this industry in terms of market scale and growth, low labor cost, and stable political environment.

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This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]

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