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Chairman's Insights

The Fiscal Deficit and Divestment strategy for SOE’s

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The fiscal deficit is becoming a real issue in Vietnam because of the statutory limit that the public debt should not exceed 65% of Gross Domestic Product. The Government has reported to the National Assembly that the budget deficit this year is likely to reach US$ 11.5 billion which will mean the expansion of public debt to just under 65% of GDP[1].

This is good news for those seeking stakes in Vietnam’s State Owned Enterprises as the fiscal deficit is forcing the sale of more assets and in general some of these, at least, are the more sought after firms. Last week saw a listing on the Hanoi Upcom market of shares in Hanoi Brewery – HABECO and talk of the Government selling the majority of their 82% stake. Based on the initial trading the company has a market Capitalisation of US$ 570 million[2].

The State Capital Investment Corporation has also been showing its determination to divest some of its holdings in SOE’s the most notable move being it’s declared intention to sell 9% of the countries largest market cap company Vinamilk. SCIC currently owns over 44% of this listed company.

As reported by VIR and other sources the SCIV intends to divest major share stakes in some of the 10 largest SOE’s including FPT Telecom and Binh Minh Plastics. So whilst there has been little on offer from the best SOE’s or equitized SOE’s, the fiscal deficit may play out in favour of those seeking stakes in the better performing SOE’s.

Ken Atkinson

[1] Vietnam Economic News October 31st 2016

[2] VN Direct –CIMB October 31st 2016