Positive equitisation and divestment outlook in 2018
Regarded as a fruitful year for the Vietnamese stock market, 2017 also saw great strides in the restructuring of state-owned enterprises through equitisation and divestment. Dang Quyet Tien, director general of the Department of Corporate Finance, spoke with VIR's Manh Bon about the results of the year’s equitisation and divestment deals as well as the new targets for 2018. 

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Mr. Dang Quyet Tien

Could you share details on the equitisation plan for state-owned enterprises (SOEs) in 2017?

Initially, 44 SOEs were planned for the equitisation in 2017. However, the government approved the equitisation of 45 SOEs with the total value of VND213.75 trillion ($9.38 billion), which was a six-fold increase over the same category in 2016.

According to Circular No.01/2015/TT-BTC dated January 5, 2015, after an equitisation plan is approved, the enterprise shall have at most 90 days to launch an initial public offering (IPO). Therefore, the 45 designated enterprises must complete the IPO by the end of the first quarter of 2018.

Additionally, over the course of 2017, the equitisation process posted several significant accomplishments, such as ensuring the efficiency of the process as proved by the total value of enterprises approved for equitisation growing six-fold on-year.

Earlier, the state divested great portions of its capital in two state-owned beverage firms, Saigon Beer Alcohol Beverage Corp. (Sabeco) and Vietnam Dairy Products JSC (Vinamilk). How would you evaluate the two so-called ‘divestitures of the year?’

According to Decision No.1232/QD-TTg on the divestment of the state ownership in various enterprises scheduled for 2017-2020, the state must divest from 181 enterprises by the end of 2017. However, only 10 enterprises conducted the divestment in accordance with the decision, eight of which were scheduled for 2017 and two of which were scheduled for 2018.

Additionally, these enterprises implemented divestments worth a total of VND1.8 trillion ($79.15 million) in five highly-sensitive fields, including securities, insurance, finance-banking, real estate, and investment funds, gaining the state a collective VND2.95 trillion ($129.64 million). Specifically, State Capital Investment Corporation (SCIC) divested VND1.9 trillion ($83.4 million) in 40 enterprises, collecting a total VND21.64 trillion ($949.9 million).

The state managed to collect billions of dollars thanks to SOE divestment, including Sabeco and Vinamilk. The Ministry of Industry and Trade (MoIT) divested 53.59 per cent of the state-owned capital from Sabeco, returning $4.8 billion to the government. Likewise, SCIC divested 3.3 per cent state from Vinamilk, which gained the state VND8.99 trillion ($394.66 million) despite its modest value at VND247 billion ($10.8 million). Judging by the quality of the transactions, the divestment plan proved to be one of the greatest achievements of the state in 2017.

According to the 2018 plan, the government will equitise 64 enterprises and divest from 181 companies. One of the major issues was that these enterprises must finalise the equitisation and divestment plans by the end of 2018 since they failed to conduct the plans in 2017. What do you think about this issue?

In particular, the number of enterprises earmarked for equitisation and divestment in 2018 account for over 50 and 46 per cent of the total number planned for 2017-2020.

A great deal of pressure would be placed on the SOE equitisation and divestment processes in 2018 because the 2017 plans approved by the prime minister specified stipulate that these SOEs must complete the equitisation and divestment processes by the end of 2018.

Therefore, 2018 can be considered the “hinge” year for SOE reform. Nonetheless, the annual equitisation and divestment schedule could be subject to changes as precisely 127 SOEs would be equitised and 406 would be divested by the end of 2020. Personally, I think the schedule depends on the determination of local authorities.

What do you think about the equitisation and divestment plans scheduled for 2018?

Evidently, the 45 enterprises approved for equitisation that failed to launch their IPOs in 2017 will be required to complete the process in the first quarter of 2018. Particularly, VN-Index reached a decade-record of 970 points in 2017, largely due to the high growth of the stock market, which was also one of the most important determinants of the equitisation and divestment plans.

The significant growth of the security market has made the VN-Index one of the world’s fastest growing stock indexes. Specifically, market capitalisation reached VND3.36 quadrillion ($148 billion), up 76 per cent on-year, while market liquidity increased by 63 per cent. Similarly, the average stock and fund certificate transaction value reached VND5 trillion ($220.5 million) per transaction, with the highest being VND21 trillion ($926 million).

Besides, foreign investment inflows were also extremely optimistic of the Vietnamese stock market, with net purchasing value equalling VND41 trillion ($1.8 billion), a six-fold increase compared to the same category in 2016. As the stock market was forecast continue growing in 2018, the target number of equitised and divested enterprises in 2018 is attainable.

The way I see it, the commitment of the central and local legislators as well as the leaders of enterprises played a vital role in the success of equitisation operations in the year of 2017 because this commitment was one of the key factors in divesting 53.59 per cent of the state capital in Sabeco—one of the greatest successes in SOE restructuring. In particular, on December 18, 2017, 343 million Sabeco stocks were successfully sold at the price of VND320,000 ($14.05) per stock, up 3.2 per cent compared to the stock market average.


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