Vietnam plans stake-sell-off from giant construction conglomerates

By    July 25, 2016 | 02:27 pm GMT+7

Privatization is helping firms to build, literally, while raising cash for the state coffers.

The Vietnamese government has embarked on a fresh round of stake-sales in state-owned enterprises 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 $3.7 billion in the first six months.

The Ministry of Construction has asked for the Prime Minister’s approval to privatize state-owned construction giants Song Da Corporation, Housing and Urban Development (HUD) and Vietnam Urban and Industrial Zone Development Investment Corporation (IDICO), online newspaper cafef.vn reported.

Many businesses in the construction sector have already carried out value assessments ahead of privatization, said the ministry in a meeting to review its performance in the first half of 2016.

The ministry also reported it has sold stakes in nine corporations, divesting from as many as 10 non-core businesses in an investment portfolio worth VND193.4 billion ($8.66 million) over the past six months. The privatization has subsequently brought in about VND233.5 billion ($10.45 million).

The Construction Ministry said it will accelerate share sales in state-owned firms in the sector.

Over the past two years, the government has managed to divest entire stakes in several construction companies, said Vu Anh Minh, director of the Enterprise Management Department under the Ministry of Transport. Following privatization, these companies that once received massive support from the state have been forced to improve their financial capacity, which in turn has helped them become more competitive amid increasingly fierce rivalry with foreign players.

Construction Corporation No.1 (CC1) said its initial public offering last week valued the business at VND1.56 trillion based on market capitalization.

Shares of CC1 were priced at VND14,200 and the construction firm raised more than VND200 billion, said the Hanoi Securities Trading Center.

More than 14 million shares were sold in the offering, representing about 12.8 percent of the business. The company also plans to sell 45 percent to strategic investors in upcoming offerings. The government will retain a 40 percent stake in the company.

Vietnamese authorities have been trying to privatize state-owned enterprises for several years because they are seen as a drag on the country’s economic growth.

The government divested VND2.1 trillion from state-owned firms in the first five months of this year, according to the latest report by the Finance Ministry, adding some VND4.2 trillion to the state budget.

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