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Vietnam Gears up to Divest State-Owned Enterprises in 2018

 
 

Vietnam has long been touted as one of the Southeast Asian region’s economic success stories, taking itself from war-torn and poverty-stricken to middle-class and growing within generations by virtue of savvy policy. The latest major overhaul would see hundreds of state-owned enterprises fully or partially privatized in an effort to further open the economy and arrest rising debt to GDP.

That’s why the otherwise innocuous sale of an iconic beer company dominated regional headlines earlier this week.

The Saigon Beer Alcohol Beverage Corp., better known locally as Sabeco, produces well-known beers including 333 and Saigon Beer. The brewer is one of the first major firms up for divestment amid a large-scale plan by the Vietnamese government to privatize many state-owned firms and it was a resounding success on Monday.

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Bangkok-based ThaiBev was the sole major investor, despite the expectation of a feeding frenzy among global brewing companies, winning a bid for close to 54 percent stake in Sabeco. The Ministry of Industry and Trade reported the stake to be worth $4.8 billion.

Of the region, Vietnam has the largest beer drinking population, which Bloomberg reports is reflective of both the booming middle class as well as a fairly young population. It is also one of the world’s fastest-growing beer markets, with 200 percent growth seen over the last 15 years. While many of the world’s biggest brands, including Asahi and San Miguel, stayed away from the offering, citing an overvaluation in stocks, for ThaiBev the acquisition was a no brainer.

Already one of Southeast Asia’s largest beer brands, ThaiBev has been looking to expand within the region and the 41 percent Vietnamese market share Sabeco boasted last year is a welcome addition to its portfolio.

The sale is the first major step in a long-delayed divestment plan to speed up the liberalization of Vietnam’s economy. A successor to the 1986 Doi Moi Policy, which heralded a new era of economic reforms in communist Vietnam, and its blend of socialist and market economy characteristics, the plan is targeting the thousands of state-owned enterprises across all sectors.

The State Capital Investment Corporation sovereign government fund, which manages most of the country’s state-owned listed companies, this year for the first time established a timetable for divestments in an effort to boost transparency, Nikkei Asian Review reported last month. The timetable included roadshows and awareness campaigns for the divestment process, which had finally moved along after years of deliberations and setbacks. Still, the scheme has been moving far slower than Vietnamese leadership would like, with state-owned enterprise managers and executives threatened with penalties if deadlines continue to be missed.

Saigon Securities Research, the company which consults on divestment in the country, told Nikkei Asian Review that by October just 20 companies had sold off share, out of 90 planned for partial or complete divestment this year.

Partial privatization of state-owned enterprises has been a problem in Vietnam despite the priorities of the government, with potential buyers complaining about a lack of transparency, particularly regarding how much assets are actually worth. Prime Minister Nguyen Xuan Phuc had said early last year public company valuations would be done via transparent open tenders, but that has only aided in slowing down the process.

Still, the government continues to steam ahead with the project, preferring to solve problems as they arise rather than overhaul the divestment procedure before continuing.

The Ministry of Planning and Investment has finalized a list of 375 state-owned enterprises to be wholly or partially divested by 2020 with total capital exceeding $4.7 billion, according to Viet Nam News. Next year is expected to be the peak period of divestment, with 185 companies up for at least partial divestment, as well as those which have missed the 2017 deadline.

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