SCIC unveils plan to sell State capital in ten firms

The State Capital Investment Corporation has unveiled plans to sell the entire State capital of 10 big State-owned enterprises which could garner the State budget earnings of almost 4 billion USD.

These target companies include companies on the stock exchange such as dairy giant Vinamilk (VNM), software producer FPT Corp (FPT), Bao Minh Insurance Corp (BMI), Tien Phong Plastic Co (NTP) and Binh Minh Plastic Co (BMP).

This is part of the restructuring scheme for the State Capital Investment Corp (SCIC) which was endorsed by Deputy Prime Minister Vu Van Ninh on October 8.

The timetable for the divestment has not yet been decided.

SCIC, which was established in 2006, is currently managing State capital in over 500 enterprises which businesses range from financial services, energy, manufacturing, IT, telecommunications to transportation, consumer products and healthcare.

Based on market value, Vinamilk is considered the most valuable investment. SCIC holds 45.1 percent of Vinamilk's stakes, worth almost 2.5 billion USD. The company is the biggest listed company in Viet Nam with a market value of 127.2 trillion VND (5.7 billion USD) as of October 14.

Vinamilk's chairwoman Le Thi Bang Tam declined to comment on the SCICI's plan and said the company would comply with the Government's decision.

Eight of the 10 companies which are subject to SCIC's divestment list shares on the two national stock exchanges. The divestment is expected to bring in a total of $4 billion to the State budget.

"This is a significant financial source to offset the State budget deficit which is rather large this year and will prompt the snail-paced progress of State-owned enterprises equitisation," said Bui Nguyen Khoa, an analyst of the BIDV Securities Co.

According to the Ministry of Finance, Vietnam's State budget deficit is estimated to hit 106.8 trillion VND (4.8 billion USD) in the first seven months of this year, only 44.5 percent of the original forecast.

Vietnam's trade deficit was 5.3 percent of GDP, 186.2 billion USD, in 2014 and is expected to about 5 percent of GDP by the end of this year.

The earnings will also help the Government repay public debt which amounted to 92.6 billion USD, equivalent to 46 percent of GDP by October 11, a rise of 9.6 percent year-on-year, according to the Economist's data.

This figure was however lower than the previous estimate of 59.6 percent of GDP provided by the Vietnamese Ministry of Finance.

According to Khoa, SCIC's divestment plan is in line with the Government's policy of reducing State holdings in industries which do not need State supervision.

"These are investments that the State does not need to hold as they are not relevant to national security," Khoa said.

Also according to the plan, SCIC is allowed to retain State capital in other nine large State-owned enterprises, including insurer Bao Viet Holdings (BVH), chemical producer Traphaco Co (TRA), Hau Giang Pharmaceutical Co (DHG) and Domesco Medical Import Export Co (DMC).

Regarding the potential of foreign investment, Khoa said foreign holdings in attractive companies like Vinamilk and FPT have already hit the ceiling limit which is capped at 49 percent under current laws.

"If the caps on foreign ownership in these companies are not lifted, SCIC can only sell to domestic investors and this could add heavy pressure in the market with a big sum of shares flooding the market," Khoa said.-VNA