Legal risks scare investors from privatization of state-owned firms

By Duc Minh November 15, 2023 | 05:46 pm PT

An abandoned building of state-owned cement company Vicem that has not been completed in eight years in Hanoi. Photo by VnExpress/Ngoc Thanh

Private investors are reluctant to buy stakes in state-owned companies as they fear the incomplete legal framework will not protect their rights and increase investment risks, according to experts.

Some investors say that they are reluctant to purchase stakes in state-owned companies that are being privatized due to concerns about the high legal risks, the Vietnam Federation of Commerce and Industry (VCCI) said in a recent comment.

In the first 10 months this year no equitization was recorded at any state-owned firm, according to the Ministry of Finance.

The Vietnamese government for years have been trying to divest from state-owned companies and sell shares to private firms, but so far only 30% of their targets have been achieved.

In several cases, officials have violated regulations in the process and caused losses to the state’s coffers.

The VCCI said that some investors had to cancel transactions after discovering that the seller had made errors in the sale.

The federation, which lobbies for private companies, proposed that the finance ministry adds more laws to protect the buyers of stakes in state-owned companies in case of conflict.

Finance minister Ho Duc Phoc told lawmakers recently that privatization faced issues when land use proposals were not approved for private firms.

In some cases, private firms only eye to buy stakes to own land in prime locations, and when lots were not up for sale they were no longer interested in investing, he added.