Vietnam steps up equitization to get ready for free trade with EU

The Vietnamese government policy to pest itself of these enterprises is twofold, said speakers at a recent forum in Hanoi discussing the country’s preparedness for the Vietnam-EU free trade pact that is on track to come into force in 2018.

On the one hand, it has been undertaken to raise badly needed funds to cover the budget deficit and— on the other, it marks a monumental step forward in raising the competitiveness of the country in the face of free trade with the EU.

In parallel with the ongoing equitization process of these enterprises the Government has also undertaken a program of pestment of its interest in blue-chip former enterprises it owned for which it had retained a significant post-privatization interest.

The country's leading dairy company Vinamilk and the two largest breweries, Habeco and Sabeco, are prime examples of former state owned enterprises where the government retained significant post-privatization interests for which it is now in the process of liquidating and converting into cash.

To speed up the process the Prime Minister has issued a Decision setting out plans for the government to reduce its ownership interest to less than 50% in 106 government owned enterprises by 2020.

Additionally, the Vietnam national wealth fund, the State Capital Investment Corporation, has reportedly began implementing a plan to rid itself of 137 government owned enterprises by the end of 2017.

Speaking at the forum in Hanoi, Economist Nguyen Minh Phong said one of the overarching goals of equitization is to persify the country’s private sector and create broad based healthy competition across all segment of the economy.

Phong noted that the quicker the process is completed the better for the private sector and the economy. Businesses need to gain motivation to persify, innovate and compete in a healthy open market economy.

The surest way to accomplish this end, said Phong, is to build up the private sector by transferring to it all the governments ownership interests in businesses. This is especially true considering the Vietnam-EU free trade pact.

Privately owned businesses must boost their competitiveness on just about every front if they are to have any chance of meeting the challenges that lie ahead. Government owned enterprises, said Phong, stifle the economy and serve as a major limit on integration.

The government should focus on putting mechanisms in place to support the private sector by establishing substantially more meetings between policy makers and leaders of the business community.

It should as well, noted Phong, sponsor more training workshops to introduce the Vietnam-EU free trade agreement to the business community. Enterprises must get fully engaged and participate in all phases of preparing for and implementing the free trade pact.

Most importantly, businesses should already have begun the process of completing their due diligence activities regarding the agreement and be investigating and exploring the EU market in terms of finding business associates and understanding consumer purchasing habits.

None of these activities are currently being conducted by the management of government owned enterprises to any real extent and likely won’t be performed by the private sector until the governments ownership interest is transferred to it via equitization.

Further, said Phong, the government should step back and leave it to businesses to determine the logical steps in the process of negotiations and implementation of the trade agreement with the EU.

The Government’s role should be to support Vietnamese private sector enterprises in building distribution channels and national brands in the EU but it should not attempt to micro manage the endeavour.