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Vietnam's fresh privatization push puts local firms on edge

The Vietnamese government has embarked on a fresh round of selling off stakes in state-owned companies in a bid to spur economic growth, which has shown signs of slowing down so far this year, and to counter the state budget deficit which has extended to $4.7 billion in the first seven months of this year.

This fresh effort, combined with the removal of the long-standing foreign-ownership cap, is expected to attract serious interest from foreign investors looking to enter the Vietnamese market by acquiring shares in domestic companies.

There is no doubt that the government’s latest privatization efforts could give the economy a fillip as state-owned enterprises are seen as a drag on the country’s growth.

However, some have raised concerns that as foreign investors can now own a 100 percent stake in local companies, they will rename recognized Vietnamese brands.

Vinamilk, the country’s largest listed company, has become an iconic Vietnamese brand name. Recently, the government's investment arm the SCIC announced it will fully divest its 45 percent stake in Vinamilk, giving foreign investors room to raise their ownership in the dairy company.

Foreign investors currently own a 49 percent stake in Vinamilk, while domestic individuals and institutional investors hold 6 percent, said CEO Mai Kieu Lien.

SCIC, as the main shareholder, has the greatest say in how best to privatize Vinamilk, Lien added.

“I don’t think foreign investors, if they manage to acquire Vinamilk, will change such a valuable brand name. Instead they will certainly milk it for all it’s worth,” said economist Le Dang Doanh.

Other experts share the same view on the matter.

Senior economist Pham Chi Lan said the government should hold the golden share in companies to be able to outvote all other shareholders in case foreign investors want to change the brand name of a company.

A golden share is a nominal share often held by a government organization in a state-owned organization undergoing the process of privatization.

Prime Minister Nguyen Xuan Phuc has made it official that the government will continue offloading shares in as many as 12 state-owned giants this year.

The list includes dairy giant Vinamilk and the country’s biggest brewers Sabeco and Habeco, which are among the few state-owned enterprises currently performing relatively well.

It is estimated that Vietnam could rake in about $7 billion from these divestments.

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