outlook for 2017 through eyes of foreign investors
The Vietnam economy showed
resilience in 2016 with GDP growth an estimated 6.2% bolstered mainly by
robust domestic demand and strong performance in foreign sector manufacturing
economic outlook for 2017 remains mixed in the eyes of foreign investors amid
rising global economic uncertainties and questions about the government’s
commitment to sell off state owned enterprises (SOEs) as part of the effort
to resolve the banking system’s bad debt crisis.
of last year, the National Assembly adopted a revised economic restructuring
plan for the next four years, which emphasizes the need for continued
restructuring of SOEs.
Reforming Vietnam SOEs
restructuring plan calls for the government to retain full ownership in SOEs
operating in 11 segments of the economy.
The segments outlined in the plan include military
mapping and measurement, industrial explosive material production and
trading, management of national power grid, nuclear power, management of
national railway and urban railway infrastructure, aviation control, search
and rescue services, lottery and money printing among others.
the government announced a specific list of 103 SOEs for which it would
continue to hold a 100% stake over the four-year period and another 137 for
which its interest would be partially to wholly liquidated during the period
that would be sold, the state would continue to hold more than a 65%
ownership interest in four, 50-65% in 27, and its interest would fall to
below 50% in 106 of the SOEs.
the plan through 2020 demonstrates a high commitment by the government to let
go of its state-owned monopolies in the private sector for consumer goods
such as the dairy company, Vinamilk, and alcoholic beverage manufacturers,
Saigon Beer (Sabeco), and Hanoi Beer (Habeco).
announcement of forthcoming sales of these monopolies has garnered
considerable attention and positive feedback from foreign investors and
others, particularly the international media.
for this are twofold. First, foreign investors view SOEs as a costly burden
on the Vietnam economy that would best be left to the country’s private
sector, thereby reducing government debt. The benefit from private sector
efficiency and ingenuity would in turn bolster further economic growth.
Second, an accelerated agenda for restructuring SOEs
would also go a considerable way towards resolving the bad debt crisis in the
banking system, which has been a long-standing problem that must be addressed
in a substantive and meaningful way before the economy can truly move forward
to more prosperous times.
non-performing loans (NPLs) that were transferred to the Vietnam Asset
Management Corporation (VAMC) in 2013 are not considered then it would appear
that the ratio of NPLs to total banking assets has fallen to around 3.7%,
well within an acceptable range.
receivables by the banks from the VAMC are still there and the banks still
own the underlying NPLs transferred to it— so they cannot be glossed over and
ignored by anyone’s measure.
plan was for the VAMC at some point to issue refunding bonds to raise money
to partially satisfy the bad loans. The plan was and still is a viable and a
good temporary solution, but it does not make the NPLs problem go away.
this means that insolvent banks have effectively been provided, at least
temporarily, liquidity, but there remains a need to further address the
underlying liquidity problem at some point.
investors are under the distinct impression that either the banks underlying
debt from the VAMC must be funded in whole or in part or many of them might
be forced to shutter their doors, which could be disastrous for the country’s
They look at
the sale of SOEs as a solid mechanism to solve the underlying bad debt
problem because the government can take some of the money that would have
gone to fund non-performing SOEs and use it to repay the NPLs that were
transferred to the VAMC.
government’s commitment to selling its ownership interest in SOEs as
demonstrated by past actions and the concrete plan laid out by the NA last
November and resolve the lingering banking system bad debt problems bodes
well for the Vietnam economy in the eyes of foreign investors.
confidence in foreign investors to continue to look favourably upon the
Vietnam business climate and the country as a good place to invest, which in
turn tremendously benefits the economy and social welfare of the country’s