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Vietnam: Reduction in State Holdings of Businesses Being Considered

(Mar. 22, 2016) Vietnam’s Ministry of Planning and Investment (MPI) is considering issuing a decision that would change the status of some state-owned enterprises (SOEs) and open some industrial sectors to more non-state investment. The decision would divide SOEs into three categories: those that are wholly state-owned, those with at least 65% state holdings, and those with 50-65% state ownership. The decision would replace Decision No. 37 of 2014. (Draft Decision to Reduce State Holdings in Businesses, VIETNAM LAW AND LEGAL FORUM (Mar.9, 2016); Decision No. 27/2014/QD-TTg on Criteria Lists for Classification of State-Owned Enterprises (June 18, 2014), THU’ VIÊN PHÁP LUȂT [LAWSOFT] (in Vietnamese).)

The draft decision would eliminate two previous, separate categories of SOEs, those that had 75% or greater state ownership and those with between 65% and 75% state ownership. It also would change the sectors of enterprises that had been designated for 100% state ownership, deleting “production and supply of toxic chemicals” and “planting and protection of headwater, protection, and special-use forests” from the group of businesses that are to be wholly state owned. (Draft Decision to Reduce State Holdings in Businesses, supra.)

Furthermore, the decision would require only just over 50% to below 65% governmental ownership in a number of industries in which at present state control must account for about 65-75%. These businesses include ones responsible for meeting the essential needs of people living in remote areas, plus air transport, cigarette production, and telecommunications enterprises. (Id.)

Some industries would be totally dropped from the list of SOEs, including “operation management of national seaports and international gateways,” “processing of petroleum oil and natural gas,” “maintenance of national railway infrastructure,” “maintenance of roads and inland waterways,” and “wholesale businesses dealing in preventive and curative medicines.” (Id.)

In addition, the industries listed below would no longer be in the category of businesses that are to be 50-65% state owned:

  • production of vaccines, including veterinary vaccines;
  • production of fertilizers and pesticides;
  • basic geological and hydro-meteorological surveying;
  • exploration and survey of soil, water, mineral and other natural resources;
  • production and preservation of prototypes of plant varieties and animal breeds;
  • planting and processing of rubber and coffee;
  • forestry and management of planted forests in areas not associated with national defense and security requirements;
  • ocean shipping and railway transport; and
  • production and supply of public-utility products and services. (Id.)

Reaction to the Draft Decision

Most of the government agencies, including related ministries, have agreed with the MPI on the need to reduce the categories of SOEs. Representatives of several industrial and trade sectors that would feel the effects of the change, including construction and transportation, requested clarification on which sectors would have to remain wholly state-owned. As a result, Vu Van Ninh, the Deputy Prime Minister, has asked for close collaboration between the specialized ministries and the MPI to determine which sectors are ready for government disinvestment in SOEs, which would allow greater participation of private business in those sectors. He did not, however, agree to the inclusion with the draft decision a list of specific enterprises that should be controlled by the state; instead he proposed that ministries, business sector leaders, and local agencies that want to hold a dominant proportion of shares in a particular field of investment request approval from the Prime Minister to do so. (Id.)