Equitising state-owned enterprises to boost growth amidst COVID-19

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Tiếng Việt

Equitising state-owned enterprises to boost growth amidst COVID-19

The decision to propel divestment of Vietnamese state-owned enterprises in the second half of 2020 is welcome news to investors, according to Dr Burkhard Schrage from RMIT University.

The Vietnamese Prime Minister recently issued Decision No. 908/QD-TTg, which approved a list of state-owned enterprises (SOEs) for divestment this year.

The decision aims to accelerate the divestment of enterprises where the state does not need to hold a stake, and thus restructure the state holdings of SOEs. It will also help to ensure enough capital is collected for the 2016-2020 public investment plans.

The Prime Minister’s Decision No. 908/QD-TTg lists 120 state-owned enterprises to carry out state capital divestment by the end of 2020.

RMIT’s Management Senior Program Manager Dr Burkhard Schrage said the push for SOE divestment in the second half of 2020 will create “exciting opportunities for both foreign and local investors”.

“While the timing may appear difficult due to COVID-19 and other global uncertainties, it makes a lot of sense to accelerate the SOE equitisation program right now. It will also address the issue that the equitisation program is behind schedule,” he said, adding that the slow pace of implementing the plan has been a point of criticism from international investors.

The acceleration will take advantage of high foreign investor interest in Vietnam, and the current historical high of the world’s stock markets, which according to Dr Schrage indicates a continued appetite for equities globally.

It will also make the most of recent structural reforms of the corporate governance codes and implementation of modern governance mechanisms across Vietnamese firms.

“These developments have helped to increase transparency and reduce investment risks related to minority shareholdings, which has subsequently raised investor confidence in Vietnam,” he said.

RMIT’s Senior Program Manager for Management Dr Burkhard Schrage said that the push for SOE divestment in the second half of 2020 is welcome news to both local and foreign investors.

While Dr Schrage believes that the surging foreign investment interest in Vietnam will bode well for continued economic growth, he said it will also require strong commitments by the authorities.

“The government should provide transparent and predictable regulatory frameworks for industries in which the SOEs operate,” Dr Schrage added.

He also suggested several measures for the state to implement in order to optimise the selling price for the SOEs (divestment revenues), including increasing the transparency of the overall process, implementing world-class corporate governance mechanisms, and appointing internationally reputed institutions for the equitisation.

“The authorities should consider carving out problematic assets of any of the companies being equitised,” he stressed. “Take banks for example, the government can take over their non-performing loan portfolio before divestment and equitise only the performing assets.”

Story: Ngoc Hoang

Dr Burkhard Schrage is the Senior Program Manager of Management at RMIT’s School of Business & Management. He holds a PhD in International Business and a Master of Arts in Law and Diplomacy from the Fletcher School, Tufts University in the United States. He has previously taught at the Singapore Management University and the University of Pennsylvania. His research areas include strategic management, emerging markets strategies, empirical aspects of privatisation and deregulation.

Business and management

Media Release

29 July 2020