August 11, 2015

 

Vietnam state firm to divest from Vinamilk

 

Heeding calls of economists and private investors, Vietnam's State Capital Investment Corporation (SCIC) has agreed to offload its 45.06% stake in Vinamilk, a concerned state official said.

 

During last week's M&A Forum 2015 in Ho Chi Minh City, Dang Quyet Tien, deputy head of the Ministry of Finance's corporate finance department, said that Vinamilk, which is the more popular name for Vietnam Dairy Joint Stock Company, was not the kind of business that required state ownership and that therefore the ministry had agreed to divest itself of its interests in the company.

 

Tien was echoed by Deputy Minister of Planning and Investment Dang Huy Dong who was also quoted during the M&A Forum as saying, "Vinamilk is a business where the government does not need to have ownership".

 

Although the government makes money from Vietnam's largest dairy firm, from which the SCIC received nearly VND2.2 trillion (US$101.4 million) in dividends in the company's most recent dividend payout, economists and businessmen alike have advocated divestment, saying that it is contrary to the aim of the government to have state capital in profitable businesses.

 

Retired economist Pham Chi Lan said state involvement in profitable companies discourage the firms from initiating bold or innovative business moves. Without state involvement, he added, a better corporate environment is created; businesses become more lucrative and, therefore, tax takes also become bigger.

 

Reduced ownership

 

Vinamilk itself had suggested that state ownership in the company should be reduced to further enhance its competitiveness.

 

Vinamilk's former CEO and director general Mai Kieu Lien had claimed that the command of the board of directors over the operations of the company has been reduced by the SCIC's rights of operation over Vinamilk.

 

For example, she said, its purchase of Dalat Milk was being delayed by the bureaucratic requirement to present a proposal and secure the SCIC's approval. The failure of the deal meant the yearly loss of an estimated VND50 billion ($2.3 million), she added.

 

She had pointed out that the process of seeking approval from the SCIC involves getting first the opinions of representatives of the state ownership.

 

Meanwhile, Vinamilk, which is 49% foreign-owned, kicked off on Monday a project to raise 24,000 dairy cows at Thong Nhat Farm in the central province of Thanh Hoa. The project also includes the construction of a milk processing factory at the farm.