Chairman’s Insights

The reality of CPTPP starts to bite…

The reality of CPTPP starts to bite…

Whilst we have talked about the significant potential benefits for Vietnam of membership of the Comprehensive and Progressive Agreement for Trans Pacific Partnership (“CPTPP”) the flip side is that Vietnam has also to deliver on some fairly tough requirements and commitments under the signed Agreement.

 

One of the major ones is creating a level playing field for all business, which has particular significance in the field of State Ownership and Equitisation, something that Vietnam has struggled with since the late 90’s. Under the terms of the CPTPP all member states have to ensure that all businesses, including those with state ownership operate equally under market mechanisms and are banned from conducting anti-competitive practices, whilst having to make all their operational information transparent. Whilst this is of course good news for the private sector, both domestic and foreign invested, it will be a tough call for the Government whose attempts to speed up the equitisation process have met with limited success.

 

Although the full impact of the provisions will not come into effect for 5 years from the date of signing there are provisions that any member state may request from another many types of information on state owned or partly owned enterprises, including how the activities of an SOE may be affecting trade and investment.

 

Vietnam is committed to reducing the total number of SOE’s to just over 100 by 2020 and whilst the Government has been trying to speed up the pace of equitisation, in recent years the SOE’s themselves have been dragging their heels although part of the delay is often due to the process itself. In late 2018 the number of SOE’s stood at 494[1] and according to the Ministry of Finance 570 SOE’s were equitized in the period 2011 to 2016.  In 2018 only 32 SOE’s were equitized against a Government target of 85[2]. Interestingly neither Hanoi nor HCMC completed any equitisation even though they had significant targets.

 

There is concern amongst experts that if the pace of equitisation continues at the current “snail’s Pace” the Government will not be able to meet their commitments under CPTPP. However, the Government seems to be taking this issue seriously and the Prime Minister has issued a specific Directive on boosting SOE restructuring, equitisation and divestment as a top priority in 2019. If implemented this should help further boost private investment into former SOE’s as part of the commitments under the CPTPP and other FTA’s.

 

Kenneth M Atkinson

 

[1] Vietnam Investment Review  January 28th 2019

[2] Vietnam Investment Review January 28th 2019

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