Vietnam - State-owned groups to divest from for non-core investments by 2015

Vietnam's state-owned corporations and groups have been requested to withdraw from their non-core investments before 2015.

The Vietnamese Government officially fixed the deadline for state-owned corporations and groups’ non-core withdrawal on July 9. This is considered an important step towards the restructuring of State-owned enterprises, particularly those that have invested in the risky sectors such real estate, banking, finance and insurance.

The corporations and groups this will apply to have been required to design restructuring plans which include divestment from their non-core activities. They have also been required to withdraw from investments in joint ventures and associated companies which are not related to their main areas of business. Those organisations involved in these risky ventures are required to promptly submit their plans for consideration. Organisations involved in less risky investments will be allowed to divest in a more gradual way.

Ministries and provincial people’s committees have been assigned to consider, approve or deny the capital removal plans after receiving permission from the Ministry of Finance.

The Ministry of Finance has been asked to send supervisors to State-owned corporations and groups to check their use of State capital and their capital withdrawal processes during their restructuring.

According to a report by the Party Committee for Central Businesses Bloc, currently 21 out of 31 State-owned corporations and groups have expanded to non-core business areas, using a total of 22.6 trillion dong (US$1 billion). Among those, Song Da Holdings invested 6.94 trillion dong (US$330.47 million), PetroVietnam around 5.4 trillion dong (US$257 million) and EVN with nearly 2.1 trillion dong (US$100 million).

However, most of the groups said that their non-core investments helped to ensure that they maintain an acceptable rate of 30% lower than their charter capital. The non-core investments of PetroVietam account for 3.76% of its charter capital, while the rate is 2.8% for EVN.

Vinacomin recently decided to withdraw from its non-core investments, which equal 115.8 billion dong (US$5.5 million). The four companies from which they divested were Vietnam National aviation insurance Company, BIDV Expressway Development Company, Hai Ha Economic Zone Development and Investment Company and Long Thanh Development and Investment Joint Stock Company.

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