State firms equitise, but fail to go public

October, 24/2016 - 09:00

After postponing it for several years, Sài Gòn Alcohol, Beer and Beverage Corporation (Sabeco) is finally likely to go public this year following the Government’s urgent call to divest shares in large State-owned enterprises in which it does not need to hold controlling stakes.

by Thiên Lý

After postponing it for several years, Sài Gòn Alcohol, Beer and Beverage Corporation (Sabeco) is finally likely to go public this year following the Government’s urgent call to divest shares in large State-owned enterprises in which it does not need to hold controlling stakes.

On October 5 Sabeco’s executive board made an announcement at a shareholders’ meeting to get opinions about a proposal to list the company’s shares on the HCM Stock Exchange (HOSE) this year.

If approved by the shareholders, Sabeco will likely make an initial public offering (IPO) this year.

At the annual shareholders meeting in May many shareholders asked the chairman why the company had postponed listing its shares on the stock market, which it should have done nine years ago after the company was equitised.

Not only Sabeco but also many other major companies face a similar situation after failing to go public several times.

Among them is Sabeco’s northern peer, Hà Nội Beer Alcohol and Beverage Corporation (Habeco). Like Sabeco, this company was also equitised nine years ago and has planned several times to make an IPO, but all the plans have remained on paper.

However, Habeco’s tardiness seems worse than Sabeco’s since the latter immediately came up with a clear plan to list this year following the Government’s plea while the former has taken no action to date.

Another major company that is also said to have postponed listing of its shares is Việt Nam Textile and Garment Group(Vinatex). The company failed to carry out its plan to list on the UPCoM market as scheduled in March. Recently Vinatex has also been rumoured to have plans to list on HOSE.

But nobody knows exactly when Vinatex will list though its plan to go public was approved at its annual shareholders meeting last year.

In recent years the Ministry of Transport has been appreciated for its efforts to equitise the companies it runs. Yet, the number of transport enterprises to have listed remains modest despite the fact that many of them have several times planned to go public after being equitised.

At its annual shareholders meeting this year ACV’s leadership pledged to list on UpCoM by late June after shareholders approved a plan to go public. But nothing has happened to date.

Explaining the equitised enterprises’ delay in going public, the managers of many eligible enterprises said they had made certain efforts to list their shares on the stock market.

But it is not an easy task because they need to carefully consider many factors to effectively protect their brand names and sell their shares at the highest prices to bring the maximum possible benefits to the shareholders, they said.       

In the face of the enterprises’ delay, the Government recently issued Document No 1786 requiring State-owned enterprises that are already equitised to register for listing their shares on the stock markets in line with current regulations before November 1 this year.

In 2014 too the Government had issued a decision on capital withdrawal, stake sale, trading and listing by State-owned businesses.

It said that in case of businesses that had transformed into joint stock companies before the effective date of the decision, the State’s board representatives would have to co-ordinate and persuade the businesses to complete listing within one year.

This means that many equitised businesses that have not listed are violating this decision.

Analysts said, however, that Document No 1786 lacks provisions to make relevant agencies and individuals accountable for listing the deadline, meaning the delay in going public would continue.

They said the Government needs to issue another legal document spelling out penalties for executives failing to perform the task of taking equitised businesses public.

Central bank wants to keep monopoly over bullion

The Ministry of Planning and Investment has recently made draft amendments to laws focusing on making foreign capital flows smoother.

The amendments, which are in the public domain for suggestions, propose abolition of 67 conditional business lines specified in the 2014 Investment Law.

Analysts said the amendments, if approved, would open up many industries to foreign ownership, allowing foreign investors to take a majority stake in or wholly own businesses.

Among the 67 are debt trading, real estate exchanges, real estate valuation and brokerage, coal trading, commercial assessment services, car warranty and maintenance, import of radio transmitters and transceivers and plastic surgery.

Notably, they also include bullion production, minting currency coins and printing money. But many analysts said this goes against the current Decree 24/2012/NĐ-CP on the management of gold businesses.

The decree gives the Government, through the State Bank of Việt Nam (SBV), a monopoly over bullion production as well as the import and export of gold.

It was aimed at stabilising the gold market, preventing hoarding and speculation, and minimising the influence of the gold market on monetary policy.

The analysts said production of gold, money and valuable papers should be done by the SBV at the National Currency Printing Factory.

The decree also classifies bullion trading as a conditional business requiring institutions and individuals wanting to buy or sell gold to obtain a licence from the SBV.

They are also required to maintain a capital of at least VNĐ100 billion (US$4.7 million) and a distribution network covering at least three provinces or centrally-administered cities, have at least two years’ experience in the gold trade and paid taxes on gold trading of over VNĐ500 million ($23,800) for at least two years.

The analysts said these conditions are essential to ensure effective management of gold trading activities to ensure the stability of the market.

The central bank too has agreed that the amendments should include a list of business lines in which institutions and individuals are not allowed to invest.

Manufacture of bullion and export and import of gold as well as printing money for the purpose must be in this list, it said.

Want bank loan? Don’t ask in Vietnamese

In recent years many domestic banks have competed with each other to lend to foreign-invested companies, considering them VIP customers.

Among them is Vietinbank, whose branch in the southern Bình Dương Province signed a US$7.6 million credit contract with Cyprus’s Medochemie Far East Company Ltd in July.

VIB and Vietcombank signed a contract for a syndicated loan of VNĐ540 billion with Hong Kong’s TexHong Group, which plans to build a factory in Quảng Ninh.

Many lenders, including Vietinbank, Vietcombank, BIDV and VIB, even have a separate department to take care of foreign customers.

According to State Bank of Việt Nam statistics, outstanding loans to FDI enterprises have reached VNĐ100 trillion.

Why are banks favouring foreign businesses, which usually have deep pockets?

Analysts said it is simply because the FDI sector accounts for a major proportion of the country’s industrial production and export value. The latter is bound to surge with Việt Nam’s signing of a raft of international trade agreements.

Besides, the banks have cash but not many domestic good projects to fund.

But many experts are unhappy with this trend.

They said Việt Nam has been trying every possible way to attract FDI because it needs capital for economic development.

The country has been rolling out the red carpet to foreign investors, offering many business models ranging from 100 per cent foreign ownership and joint ventures to business co-operation contracts.

Some 80 per cent of FDI projects are fully foreign-owned, according to certain reports. But this figure is inaccurate because some of them are registered by foreign investors but developed with Vietnamese funds.

In many cases, foreign investors only register projects in the country and seek funding from local sources.

This goes contrary to the Government’s policy of attracting FDI into the economy.

The experts said the central bank needs to have policies to limit banks’ injection of money into FDI businesses and encourage them to favour domestic firms that are always in need of funds.

They also point to the obvious risk that foreign businesses could flee the country without paying back loans. As Lifepro Việt Nam did. In 2012 the bosses of this company disappeared without repaying a huge loan of nearly VNĐ3.1 trillion the company got from Agribank.

According to the Ministry of Planning and Investment, so far the managements of 518 FDI enterprises have bolted, many of them are debtors to local banks.

Market observers said Vietnamese banks take it very easy when appraising FDI enterprises’ loan applications, enabling many of them, particularly small ones, to borrow.

They said the country’s robust global economic integration means the trend of banks lending to the FDI sector would be unavoidable as the lenders seek opportunities to develop their business and improve their competitiveness and market share. 

But they should be more cautious, they warned. — VNS