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Foreign ownership ratio in businesses remains modest

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 With the government’s Decree 60, businesses now have the right to lift the foreign ownership ratio ceiling to 100 percent.  

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Foreign investors are allowed to hold up to 100 percent of shares in Vietnam's businesses

 

Some years ago, businesses repeatedly urged the government to remove the cap on foreign ownership ratio in Vietnam’s businesses to pave the way for them to seek foreign capital.

Finally, Decree 60, released in September 2015, stipulated that there will be no limit on foreign ownership ratio in most Vietnam’s businesses, except ones in special business fields.

Soon after the decree took effect, SSI became the first company that completed procedures to lift the foreign ownership ratio ceiling to 100 percent. Daiwa Securities Group Inc then poured money into the company to raise its ownership ratio.

Following SSI’s move, many other businesses drew up plans to expand room for foreign investors. Some businesses even reorganized to be eligible to lift the foreign ownership ratio ceiling to 100 percent.

However, the number of businesses completing procedures to expand room for foreign investors remains modest. By early September 2018, fewer than 30 out of 740 listed companies had wrapped up the procedures. 

Analysts have cited two reasons to explain why only 5 percent of listed companies now offer 100 percent ownership ratio to foreigners.

First, the 100 percent foreign ownership limit is not applied to all businesses and all business fields. The 49 percent limit is still applied to a few business fields. As a result, many enterprises have to give up some business fields if they want to welcome foreign investors.

Second, many enterprises cannot see the feasibility of the plan to call for foreign capital. In other words, whether businesses seek foreign capital not only depends on the law, but on their capability as well.

SBT (Thanh Thanh Cong JSC) and DHG (Hau Giang Pharmacy), for example, had to withdraw from medicine distribution and packaging industries to satisfy requirements to lift the ceiling.

In the short term, the narrowing of business fields forces enterprises to set business targets that are lower than usual.

Doanh Nhan Sai Gon cited a report showing that fewer than 10 businesses have foreign ownership ratio of over 50 percent. 

Meanwhile, as the time during which foreign investors hold more than 50 percent of shares remains short, it is impossible to make a conclusion about the impact of foreign capital on the lifting of the ceiling.

However, it is clear that the presence of foreign investors has improved the transparency of businesses.

 

Source: VNN

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