Vietnam - Real Equitization Progress – Opening State Owned Enterprises up to Foreign Investors in 11 Sectors

1. Vietnam - Real Equitization Progress –
Opening State Owned Enterprises up to Foreign Investors except for 11
Sectors
Decision No 58/2016/QD-TTg issued by the Government establishes 11 sectors in which the
state will retain full ownership (103 SOEs):
1. Mapping measurement for military and national security purpose;
2. Industrial explosive material production and trading;
3. Transmission, system regulation and management of the national electricity distribution
grids; multi-purpose hydropower, nuclear power of particularly importance for economy -
society attached to defense and security,
4. Management of infrastructure system of national railway, urban rail invested by the State;
running transportation of national rail, urban rail invested by the State;
5. Air traffic services, notification services of aeronautical information; search and rescue
services;
6. Maritime security (excluding dredging, maintaining public navigable channels);
7. Public post;
8. Lottery business;
9. Publishing (not including printing and publishing publications sectors);
10. Printing, minting money, producing gold bars and golden souvenirs; and
11. Credit policy for economic and social development, securing banking system and credit
institutions.
It also lists 137 SOEs in which state will retain ownership from below 50%, 50%-65% and over
65%. These SOEs will be equitized during 2016-2020 period. Among these SOEs include big
names such as VNPT, Mobifone, Agribank, Electricity Corporations, Post Corporation of
Vietnam, Oil & Gas Corporation of Vietnam, etc.
Sectors in which the state will retain ownership of over 65% (there are 4 companies in total)
include:
1. Operation management of airports; operating flight area services;
2. Navigation information services, surveillance, aviation meteorological services;
3. Mineral mining of large scale according to current regulations on classification of mine
scale;
4. Exploration, development and exploitation of oil and gas mines; and

2. 5. Finance and Banking (excluding insurance, securities and fund management companies,
finance companies and financial leasing companies).
Sectors in which the state will retain ownership of 50%-65% (there are 27 companies in total)
include:
1. Production of basic chemicals;
2. Air carriage;
3. Enterprises whose market share is 30% or higher, having a role to ensure major balance of
the economy and stabilize the market, operating in the following areas:
a) Rice wholesale;
b) Focal petroleum imports.
4. Production of cigarettes;
5. Provision of telecommunications services with network infrastructure;
6. Growing and processing rubber, coffee in strategic areas, mountainous and remote area
linked to national defense and security;
7. Enterprises ensuring basic needs for the development of production and improving
material life, spirit of ethnic minorities in mountainous, remote and isolated area;
8. Electricity retail business (consistent with the formation and development of the electricity
market levels).
The publication of companies with state ownership will encourage the equitization process.
Investors will find it much more easier to know which enterprises still allow for foreign
investment. Yet, equitization of SOEs is raising many concerns due to the leaders’ fear of losing
their employment to private investors.
The Government should improve information disclosure and lift the cap on the number of
strategic shareholders in SOEs so that both the state and private investors find interest in the
equitization process.
Clarified regulation on Foreign Ownership Limit
With an attempt to attract more foreign investment in the securities market and expedite the
current equitization process, on 26 June 2015, the Government issued Decree No. 60/2015/ND-
CP to relax foreign ownership limit in certain sectors.
However, Decree 60 has had a limited impact on the stock market. The complicated and
inconsistent procedures restrain private initiatives and onerous requirement of hiring consultant
and lawyers constitutes a significant drag for investors.

3. To encourage foreign capital inflow to the stock market especially for newly privatized SOEs,
clear guidelines creating a transparent environment should be established. Indeed, a sustainable
investment environment would be supported by a clear statement that the Law on Investment
does not apply for public companies but the Law on Securities.
Moreover, enterprises not operating in sectors where there is explicit limit to foreign ownership
in Vietnam laws or international agreements to which Vietnam is a party should be eligible to
100% foreign ownership.
In addition, all foreign-invested public companies or public investment funds must be treated the
same as local entities, except for specific cases being explicitly stated in the Vietnamese
legislation or international agreement to which Vietnam is a party.
Companies operating in the banking sector subject to equitization are quite limited. Foreign
ownership should be raised, for instance, to 35% for banks in which the State is a majority
shareholders, 49% for private banks and 100% for banks bought at 0VND by the state.
Transparent privatization schedule and enforcement
The privatization schedule as well as bid offers of each SOEs concerned should be publicly
published. In order to ensure the equitization efficiency, the State should oblige privatized
companies to strictly follow the schedule by imposing fine of 10% of the company’s net profit.
Besides, by holding members of the board personally accountable for the company’s violation,
the state would press the newly privatized company to meet with the Government’s schemes.
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If you have any question on the above, please do not hesitate to contact Mr. Oliver Massmann
under omassmann@duanemorris.com, Oliver Massmann is the General Director of Duane
Morris Vietnam LLC. Thank you very much!