Vietnam Dairy Products(Vinamilk), has removed a cap on foreign ownership, a first for a state-owned Vietnamese company, opening the possibility of it becoming 100% foreign-owned.
State Capital Investment Corp., the sovereign wealth fund of Vietnam, is the biggest shareholder of Vinamilk with a 45% stake. Vinamilk is trying to expand operations both at home and abroad through capital and business tie-ups with foreign companies.
In September 2015, the Vietnamese government lifted the foreign ownership cap of 49% on listed companies, excluding banks and other businesses subject to state control.
Prior to complete foreign ownership, however, each company needs to change internal rules with the consent of shareholders. So far, about 10 private companies, including Saigon Securities, which is more than 15% owned by Daiwa Securities Group of Japan, have changed in-house rules pertaining to ownership.
As Vinamilk has already reached the previous limit of 49%, to raise its level of foreign ownership, the company needs to issue new shares or have the government sell shares.
Foreign investment in state-run Vietnamese companies has increased lately. Vietnam Airlines agreed in January to an sell 8.8% stake to Japan's ANA Holdings, which has All Nippon Airways under its wing, for 13 billion yen ($118.03 million). Under an agreement expected to be signed soon, ANA and Vietnam Airlines will expand joint operations that include code-share flights and maintenance of aircraft. The Vietnamese airline hopes to become more competitive with the help of ANA's high-quality services.
Aeroports de Paris of France acquired a 7.4% stake in Airports Corp. of Vietnam, which manages some 20 airports in the country under the Ministry of Transport, in March. Japanese trading house Itochu bought a 5% interest in Vietnam National Textile and Garment Group, the nation's biggest textile company and known as Vinatex, in 2015.
There were about 800 state-owned enterprises in Vietnam at the end of last year. Corruption involving state-run companies comes into the open occasionally. For example, executives of Vinashin, a now-bankrupt state-owned shipbuilder, were arrested for embezzling more than 2 billion yen in the past.
Vietnam thus has yet to develop a completely open environment for the acceptance of foreign capital in local companies. "We hesitate to become big shareholders with stakes of 20-30%" in Vietnamese companies, said an official at a major Japanese trading house.
TPP influence takes root
As a member state of the TPP accord, Vietnam will be required to eliminate opaque preferential treatment for state-owned enterprises.
The presence of U.S. companies in the Southeast Asian country is expected to grow at a time when local companies are pursuing management reforms. While in Vietnam until Wednesday, President Barack Obama said the U.S. is ready to support structural reforms needed in Vietnam.
Among American companies, General Electric signed a memorandum of understating with the Vietnamese Ministry of Industry and Trade to promote the use of electricity produced by wind power.
With renewable energy expected to become a high-growth business area, companies from both countries confirmed their cooperation in the fields of solar and biomass power generation.
Leading U.S. machinery-maker Honeywell International signed a memorandum of understanding with PetroVietnam Gas, the country's biggest gas company, for cooperation in equipment management technology and human resources development.
Trade between the U.S. and Vietnam totaled $41 billion in 2015, marking a 92-fold increase from 1995. When the TPP takes effect, Vietnam is expected to increase exports of needlework products, shoes and other items to the U.S. and imports of such products as beef and precision instruments from the U.S.
Source: Nikkei Asian Review