Vietnam risks missing its target of divesting stakes of state enterprises this year, another setback to a decades-long program, with a stocks selloff in the region also posing a hurdle to the country’s privatization goal.
“It will be hard to reach the goal” of selling 17.9 trillion dong ($795 million) of non-core investments by the year-end “if companies aren’t more determined and active in executing the planned sales,” Deputy Finance Minister Tran Van Hieu said in written answers Monday to questions from Bloomberg.
Prime Minister Nguyen Tan Dung had set the end of the year as the deadline for state enterprises to sell their non-core investments, and in April said leaders of companies that are behind their goal will be dealt with sternly. Vietnam is trying to complete a share sale program that began in the 1990s as the government seeks to spur growth to the fastest in four years.
State-owned enterprises have sold 4.1 trillion dong worth of non-core investments in the first seven months this year, including stocks, banks and properties, Hieu said. A regional stocks selloff may be a challenge to further divestments.
The region’s benchmark stock gauge headed toward a bear market Monday and Chinese shares plunged by the most since 2007 on speculation that the slowdown in its economy may be deeper than previously thought. The VN Index fell 5.1 percent at the mid-day break, having declined more than 15 percent this month.
“The stock market has fallen and this downtrend may prolong toward the year-end on weak demand and low liquidity,” said Nguyen Duy Khoa, Ho Chi Minh City-based head of retail equity services in Saigon Securities Inc. “In such a market situation, state companies won’t draw many investors to their share sales.”
The government’s privatization plan fell short of its target last year too, with just 143 state-owned companies selling stakes compared with a goal of 200. SOEs sold only 27 percent of the shares they offered at initial public offerings in the first seven months this year, according to Hieu.
Vietnam privatized 79 state companies through July this year and has another 210 enterprises to sell shares in by year-end, according to Hieu. The process is “slow and behind schedule” due partly to executives’ concerns about their positions at these companies after the sales, he said.