Vietnam's Economic Development Enters New Phase with Equitisation of State-Owned Enterprises

Strategic Insights -

Vietnam's economic development will undergo a significant shift as the country's largest state-owned corporations go public, according to Le Xuan Nghia, director of the Vietnam Foreign Trade Bank's Strategy and Development Department. The policy to equitise major successful state-owned enterprises (SOEs) this year has caught both foreign and domestic observers off guard. Deputy Head of the National Steering Board on Enterprise Renewal and Development, Pham Viet Muon, emphasized the importance of speeding up the equitisation process, particularly in the rate at which shares are being purchased, with most joint stock companies selling shares to staff members and only 4.8 per cent of recently equitised companies' stock being sold to non-employees.

Key Takeaways:

  • Over 1,700 state-owned enterprises (SOEs) in Vietnam will be equitised by the end of 2005, with 265 already no longer wholly owned by the Government.
  • Five of Vietnam's largest SOEs will be equitised next year, bringing the total number of SOEs fully owned by the State to under 1,000 in six industrial areas.
  • The rate of shares sold outside of recently equitised companies is low, with only 4.8 per cent of shares being sold to non-employees.
  • Most recently equitised enterprises are small, with an average capital of VND5 billion (approximately $240,000 USD) each.
  • Despite challenges, nearly 1,750 enterprises are now equitised, with 93 per cent of those equitised in 2003 turning substantial profits.
  • The Cables and Telecom Materials Joint-Stock Company (SACOM) has increased its value by 406 per cent since its equitisation six years ago and has become one of the most successful companies in Vietnam, with considerable growth in output, revenue, profits, and wages.

Statistics:

  • 1,700 state-owned enterprises (SOEs) in Vietnam will be equitised by the end of 2005 (Deputy Head of the National Steering Board on Enterprise Renewal and Development, Pham Viet Muon).
  • 265 SOEs are already no longer wholly owned by the Government (Deputy Head of the National Steering Board on Enterprise Renewal and Development, Pham Viet Muon).
  • 4.8 per cent of recently equitised companies' stock have been sold to non-employees (Deputy Head of the National Steering Board on Enterprise Renewal and Development, Pham Viet Muon).
  • Nearly 1,750 enterprises are now equitised (National Steering Board on Enterprise Renewal and Development).
  • 93 per cent of those equitised in 2003 are turning substantial profits (National Steering Board on Enterprise Renewal and Development).
  • The Cables and Telecom Materials Joint-Stock Company (SACOM) has increased its value by 406 per cent since its equitisation six years ago (Source: VNA).
  • SACOM has recorded a 740 per cent increase in output, 481 per cent in revenues, 741 per cent in profits, and 53.8 per cent hike in workers' wages since its equitisation (Source: VNA).

Sources:

  • Vietnam Foreign Trade Bank official, Le Xuan Nghia, director of the bank's Strategy and Development Department
  • Deputy Head of the National Steering Board on Enterprise Renewal and Development, Pham Viet Muon
  • National Steering Board on Enterprise Renewal and Development
  • VNA (VietNamNet) article "Vietnam's Economic Development Enters New Phase with Equitisation of State-Owned Enterprises"