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20 Apr 2017

International Economy

Vietnam’s SOE Privatization: Opportunities for Thai Investors in Potential Businesses (Current Issue No. 2841)

Currently, Vietnam is one of the fastest-growing economies and investment magnets in Asia, also having a thriving consumer market. To facilitate and promote future economic growth, the Vietnamese government is now placing additional importance on infrastructural development. Since substantial financial resources will be required for large infrastructure investment projects, privatization of state-owned enterprises (SOEs) has become an important funding methodology for the government.

Under Vietnam's SOE privatization plan for 2016-2020, there is a number of promising business sectors that should be of interest to international investors, in particular to some in Thailand, too, given its huge market and rapid growth in urban communities. Having assessed Vietnamese SOEs, based on a number of components, e.g., foreign ownership (that allows greater than 50 percent), indirect benefits from such investments (such as natural resource-related concessions and distribution networks), and market factors, we at KResearch are of the view that SOEs having the best investment potential would be those related to infrastructural development, e.g., construction/ construction material (cement) businesses, plus those growing with the domestic market, e.g., consumer goods and communications.

Other SOEs that should be of interest to international investors would be those in upstream petroleum E&P and financial service businesses because they are allowed to invest in such SOEs as business partners without having to hold shares in them as a result of mergers.

However, investors are advised to consider whether these SOEs match their investment goals or not, because this is important for mapping out appropriate investment strategies. In some cases, foreign investors may not need to hold a majority of shares in these SOEs, but only a certain proportion of shares as their business partnerships. This should be adequate to gain indirect benefits from investments, e.g., especially when they want to use Vietnam's distribution networks for their consumer goods business.

International Economy