1

Equitization Process
2
Introduction
Vietnam launched the privatization program in 1992


Equitization is a process of transforming an SOE into a joint-stock company


The government states that the equitization is not always privatization


The government continues to hold controlling role through investment
management in some large SOEs ( in some special industries. E.g. Electricity,
Oil and Gas, etc)


Equitization in Vietnam is considered as partial privatization
Source: Ministry of Finance and others
Stages of Equitization
3
Stage 1
1992 1996: The Pilot Stage of the Equitization
program
Stage 2
5/1996 - 5/1998: Expansion of the Pilot Program
Stage 3
6/1998 5/2002: Acceleration of the Equitization
Program
Stage 4
Continuing Equitization Program
Source: East Asian Development Network
4
Steps on Equitization
Equitization
plan
Establishment of
Steering Committee
and Assistant team
Documentation:
valuation method,
legal document,
audited financial
statements and
other related assets
approval
Equitization Plan:
Introduction, labor
planning, business
and equitization
plan, IPO method.
Initial Offering
Association with a
financial institute to
IPO
Auction at the
company/securities
companies/stock
exchange
Completion
Shareholders
meeting
Publicize
information about
the newly formed
joint-stock company
Hand over from
State-owned
enterprise to joint-
stock company
Registration and
Licensing
Post
Equitization
Restructuring
Management
Audit appointment
Source: Ministry of Finance, legal documents on equitization, Deloitte
5
Market Regulation
Foreign Strategic Investors
Decree No.109/2007/ND-CP (26/06/2007)



Fundamental distinction between foreign investors and domestic investors



Foreign investors are defined as "foreign organizations and individuals injecting capital to
carry out investment activities in Vietnam



Companies established and operating in Vietnam are treated as domestic investors for the
purpose of investment in SOEs being equitized with a restriction



Restriction in investing on state-owned banks are more stringent and detailed: foreign credit
organization, asset size at least $20 billion , experience, reputation, etc.

Source: Ministry of Finance
6
Equitization Process
About 3,500 SOEs represent 40% of GDP
2007: 82 SOEs were equitized (21% planned)
2008-2010: Planned to rearrange 1,535 SOEs
Of which, 948 will be equitized
2008: Most equitizations were delayed
Explanation: Decline in stock market
June 2009: IPOs with reasonable starting price
2009: Plan to equitize some large banks, corp.
Source: Ministry of Finance, Doisongphapluat.com.vn, Deloitte and others
The State will retain ownership in:
100% - Public utilities, power transmission, oil and gas,
aviation and railways
50% - Energy, mining, telecoms, infrastructure, cement and
steel production, sanitation and water supply, and banking
and insurance.
Equitization
Target
State
corporations
(90)
State
corporations
(91)
Financials

Affiliated enterprises
of Ministries/local government
SMEs
Multiple sectors
SCIC


Vietnam Airlines Corp.
VNPT (SAM, Mobifone)
Vinatex
Vinashin (VSP, etc.)
EVN (PPC, VSH, etc.)
PVN (DPM, PVC, etc.)
Etc.

Baoviet Insurance
VietPetro Insurance
Vietcombank
Vietinbank
BIDV
Mekong Housing bank
Agribank
Etc.
Equitization of SOEs in Vietnam
7
Source: From various sources
Equitization Schedule of SOEs
2006 2007 2008 2009 2010
Financials
91 Corp.
90 Corp.
1992
3,756 116
(21% of plan)
74 948
(Out of 1,535 to be arranged)
(2003)
(28% of plan)
8
Source: From various sources
9
123
251
211
205
164
539
715
724
255
116
74
20
0
100
200
300
400
500
600
700
800
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H/2009
Number of Equitization Transactions
Source: Ministry of Finance, Deloitte and others
10
Decision 06/2006/QD-TTg => VNPT Group
Chartered capital: $2 bil
67 subsidiaries (40 equitized)
Well-known brands: EMS, Vietnamnet, 1080, and
Mobifone
41% market share
Revenue $1 bil, profit margin 35% (2008)
Equitization plan
Market value: $2 bil (Credit Suisse)
License for 3G service
Award Best telecom company in 2008
Vinaphone
20% market share
Equitization plan
Telecommunication Financial services
Post Information Technology
Vietnam Posts & Telecommunications Group (91 corp.)
11
Source: From various sources
Decision 69/QD-TTg => Vinashin Group
76 subsidiaries & 12 allied companies
4 JVs Huyndai-Vinashin shipyard joint venture
($160 mil)
Revenue: $1.7 bil in 2008 (48% growth) & est.
$2.5 bil in 2009
2006-2010 plan:
Upgrading ship building technology and
equipments, increasing the localization to 60-
70%
2010: building ships of 100,000 DWT,
repairing ships of 400,000 DWT,
manufacturing and assembling the
equipments for shipbuilding
Looking for foreign partners which possess
high technology of shipbuilding to cooperate
and form modern shipyards.
Shipbuilding
Vinashin Ship Building Group (91 corp.)
Financial services
Civil Engineering
Foreign trading
12
Source: From various sources
Decision 48/2006/QD-TTg => EVN Group (53
subsidiaries) - the only electricity distributor in VN
EVNs capacity of 12,000 MW, generating 57.44
bn kWh/year (70% of national demand)
Increasing capacity to 15,000 MW in 2009
Son La hydropower plan: capacity 2,400 MW,
providing 10 bn kWh/year (biggest plant in Asean
area) => start operating in 2010
Equitization process
2008-2008: 29 subsidiaries equitized
Since 2009 :
Reduction of current holding in its
listed subsidiaries (VSH, TBC, PPC)
Preparing for equitization of its
subsidiaries and waiting for the stock
market to recover => higher capital
surplus
Electricity production Electricity distribution
Telecommunication Financial services
Vietnam Electricity Group (91 corp.)
13
Source: From various sources
Decision 199/2006/QD-TTg => PVN Group
20 subsidiaries (13 equitized)
5 allied companies
2008: Revenue of $16 bil (20% GDP), export
of $11.15 bil
2009: Revenue of $3 bil, export of $1.45 bil
Exploration activities in many other countries
(Nicaragua, Peru, Indonesia, Algeria, etc.)
Equitization plan:
2Q/2009: Hanoi oil & trading services
Co. ltd., PVN machines & accessories Co.
ltd., Hue petrol & gas Co. ltd.
2010: Dung Quat refinery: 2.6 mil tons
(30% national demand)


Financial services
Oil /gas exploration,
exploitation, & refinery
Transportation
Fertilizer
Vietnam Oil & Gas Group (91 corp.)
Gas Electricity
14
Source: From various sources
Decision 151 & 152/2005/QD-TTg => SCIC
Business Activities
Representing States ownership
Financial investments
Capital mobilizations
Financial advisories
production
Health
service
Info
Technology
Telecom
Consumer
goods
Consumer
staples
Financial
services
Materials
SCIC - State Capital Investment Corp.
Investing companies 899
Divested companies 183
Newly setup companies 4
Current portfolio 754
Total book value USD 473 million
Group A Group B Group C
Strategic investment Flexible investment Divestment target
Quantity 11 105 638
Capital
proportion 43% 29% 28%
15
Networking
- SCIC, SSC, MoF -
Source: SCIC and others
Opportunities for Investors
16
Clear commitments to equitized State Owned Enterprises in to Limited Liability or Joint Stock Companies and
operate under the Enterprise Law by July 20

The process is supervised strictly with a directive enforcing equitization plans needed to be submitted to the
Prime Minister by the third quarter of 2009

The State Owned Companies will be evaluated at the fair price to reflect its true value with consideration of
advantage value, i.e. geography location, brand name and development potential.

Plans for pilot projects have been discussed to establish holding groups of corporations from the existing
State Owned Companies

The State Capital Investment Corporation (SCIC) has targeted the reduction of interests in some enterprises
so that by2012, SCIC will hold controlling takes interests in about 100 enterprises indispensable to the State

90 percent of more than 332,500 small and medium sized Vietnamese Companies are in need of the capital
injection to further their operations

Vietnam was less affected by previous financial crisis because of the Governments good economic
management

Health and education sectors would be expected to appeal to foreign investors

Ongoing reforms to speed up the approval procedures for investors investment.

WTOs commitments provide more opportunities for foreign investors

Experienced foreign investors might significantly surpass the local investors in figuring out investment
opportunities

Source: Deloitte
Challenges for Investors
17
Less opportunity for foreign investors to invest in some industries

The State continues to maintain controlling interest in some equitized
companies

Foreign investment in certain industries remain restricted

Equitization agenda was not conducted on time and not committed to be on
time

Complicated procedures within the equitization process

Most of equitized companies are Small, Medium Enterprises that are not
attractive to foreign investors

Transparency is the main issue in terms of company valuation, information
providing, etc

Economic uncertainties: postponing or re-negotiating of proposed equitization
plan
Source: Deloitte
Problems of M&A in Vietnam
Arbitrary and time consuming procedures to determine
permitted scope of activities for acquisition
Unclear and absence of uniform practice in issuance of a
new Investment Certificate or modification of Business
Certificate
Post acquisition pertaining to Land Use Rights of acquired
companies
Registration for amendment of investment
certificate/business registration certificate of LLC with
two or more members in case of changing of membership
arising from assignment of equity interest
Funding sources and related tax treatment
Restructuring
Listing protection
18
Source: Gide Loyrette Nouel
Q & A
19