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Business

Market principles kicking in as Vietnam's 'new driving force'

Opening up to overseas partners fuels growth, executives say

From left, Petrolimex Deputy CEO Nguyen Quang Dzung, Vinamilk Executive Director of Research and Development Nguyen Quoc Khanh, and SMBC Country Head Masanobu Nakanishi discuss opportunities at the Nikkei Asian Review Forum in Hanoi on Nov. 15.

HANOI -- Next year is expected to bring a flurry of stock listings by Vietnam's state-owned enterprises -- a development executives say symbolizes the country's shift from a government-led economy to one powered by market principles.

The "new driving force of Vietnam is the acknowledgment that the state will not mobilize or distribute or regulate resources, but direct [companies] via policies," Nguyen Duy Hung, chairman and chief executive of Saigon Securities, said on Wednesday at the Nikkei Asian Review Forum in Hanoi. Saigon Securities is currently advising a number of SOEs on initial public offerings and divestment of state-owned stakes.

Already, the government's changing approach is encouraging companies to be more proactive about expanding their businesses and enhancing efficiency, spurring positive changes in the economy that will "promote a better environment for both local and foreign investors," Hung said. "Mobilization through financial channels is the best," he added.

New steps, new partners 

While the government has moved to allow greater foreign ownership and is pushing some 700 SOEs to list, the pace of IPOs has been slow so far. Many stakeholders are reluctant to part with their shares. 

Progress is expected to pick up in 2018, however, as the government is warning there will be consequences for those in charge of state companies that miss the deadline for restructuring and equitization. 

On Wednesday, the Ministry of Industry and Trade announced it will carry out its first round of divestment from Vietnam's largest brewer, Saigon Beer, in December. The ministry holds a roughly 90% stake and is expected to sell off more than 50% in the first round.

Such SOE reforms are crucial for the economy's growth, forum panelists agreed.

Shosuke Mori, deputy head of international banking unit at Sumitomo Mitsui Banking Corp., noted that the SOE sector has managed slower growth than the private sector and foreign-owned companies in Vietnam. "I think SOE reform will be the key in driving the evolution of the Vietnam economy," Mori said.

A number of forum participants from Vietnamese companies said they have had positive experiences welcoming overseas shareholders. Vietnam Airlines Chairman Pham Ngoc Minh said its Japanese partner, ANA Holdings, "satisfied all criteria" for an investor. ANA holds an 8.8% share, and the strategic partnership can "support [Vietnam Airlines'] expansion and growth," Minh said.

The Vietnamese carrier wants to expand direct flights to Japanese cities, as well as work with ANA on code share arrangements and mileage programs.

Nguyen Quoc Khanh, executive director of research and development at Vietnam Dairy Products (Vinamilk), said the company will "improve itself in every field" to attract investors. Vinamilk was the first in the country to completely remove limitations on foreign ownership, paving the way for international investors to hold more than 58% at present. Large shareholders include Singapore-based peer Fraser and Neave.

Following a successful second auction of Vinamilk shares last week, the State Capital Investment Corporation will hold roadshows to brief potential investors on the divestment procedures for its four blue chip companies, including information technology player FPT and Tien Phong Plastic.

Nguyen Quang Dzung, the deputy CEO of Vietnam National Petroleum Corp., or Petrolimex, hailed a partnership the company forged last year with Japan's JX Nippon Oil & Energy. The two sides are working closely in numerous areas, including cooperate management, market development and strategic planning, Dzung said. Petrolimex's foreign ownership is currently capped at 20%.

In the background of all this is the Trans-Pacific Partnership trade agreement, to which Vietnam is a party. Saigon Securities' Hung said the TPP negotiations have prompted domestic companies to adhere to international business standards, further improving the environment for investors from abroad.

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