New Criteria on the Divestment of State-Owned Enterprises

Last month, we shared Vietnam’s plans to divest in 88 State-Owned Enterprises (“SOEs”). Now, the government has issued new regulations on the criteria for the classification of SOEs and others with state capital. These criteria will be used to prepare the list of enterprises that will undergo divestment, restructuring, and ownership conversion in the period 2021-2025 (called the SOEs Restructuring Plan). The criteria are outlined in Decision No. 22/2021/QD-TTg promulgated by the Prime Minister on 2 July 2021 (“Decision 22”).

Based on the previous regulation (Decision No. 58/2016/QD-TTG), the Prime Minister had announced several lists of SOEs and others with state capital to be restructured between 2016 and 2020. Each list specifies the form this restructuring would take – whether equitization or divestment – as well as the ratio of shares to be sold.

These lists were announced in appendices to Decision 58; Decision No. 26/2019/QD-TTG dated 15 August 2019 approving the list of enterprises subject to equitization up to 2020 (“Decision 26”); and Decision No. 908/QD-TTg dated 29 June approving the list of enterprises with state capital subject to divestment (“Decision 908”). Both Decision 26 and Decision 908 will remain in force until the SOE Restructuring Plan is promulgated and replaces them.

The criteria set out in the new Decision 22 to define SOEs and enterprises with state capital subject to divestment, restructuring, and ownership conversion are as follows:

  • The industries listed in the appendix of Decision 22. This contains three categories of state investment: those where the state will retain 100 per cent control; those where the state will retain at least 65 per cent ownership of the enterprise; and those where the state will retain between 50 and 65 per cent of the shares. Decision 22 introduces some notable changes compared to the previous regulations. In particular, new sectors such as air shipping, harbor management, and scientific news have been added to the annex.
  • Enterprises which do not fit into one of the above categories but produce cement and account for 30 per cent of the market; manufacturers and public product providers with at least half of their revenues in the last three years coming from public services; and enterprises with cultural, historical, or architectural value – or those involved in national defense and local economic development.
  •  Enterprises not meeting the criteria above.

Based on these criteria, government agencies holding shares in these SOEs will send a plan for restructuring their capital to MPI within 30 days of Decision 22 coming into effect. Enterprises listed in (i) above can remain a single-member LLC, equitize, divest, or convert into multi-member LLCs. Those listed in (ii) must propose a suitable agenda for ownership conversion, restructuring, or divestment. Meanwhile, those listed in (iii) shall divest, restructure, or convert their ownership so that no state capital remains invested in the enterprise.

Decision 22 will come into force on 19 August and replace Decision 58 which covered 2016-2020. Based on the feedback of state agencies, MPI will prepare the SOE Restructuring Plan and present it to the Prime Minister for approval within quarter three of 2021.

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