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Vietnam: Decree on Sale and Transfer of State-Owned Enterprises

(Nov. 10, 2008) On October 10, 2008, the Government of the Socialist Republic of Vietnam (SRV) issued new regulations on the sale and transfer of wholly state-owned enterprises (SOEs). (Decree 109/2008/ND-CP, replacing Decree 80/2005/ND-CP, promulgated in 2005, on the assignment, sale, contracting, and leasing of SOEs; Foreign Eyes Look for SOE Stake Roadmaps, VIETNAM INVESTMENT REVIEW, Oct. 27, 2008, available at

Among the permitted buyers under the Decree are foreign-invested enterprises and foreign financial institutions. In certain sectors, the buyer may have a 100% stake in the SOE; in others, foreign equity will be limited in conformity with Vietnam's international commitments for the given sector. Thus, the permissible foreign stake applies to SOEs whose book value is less than VN15 billion (about US$900,000), but not to SOEs in such sectors as banking and telecommunications, which are part of the country's “market access roadmap” agreed to in bilateral and multilateral trade negotiations. Foreign equity in firms in these sectors will apparently remain limited to a maximum of 49% of shares in joint-ventures with Vietnamese partners; additional restrictions apply to unlisted firms and banking institutions. (Hanoi Could Move to Ease FDI Rules in 2009, BUSINESS MONITOR INTERNATIONAL, Oct. 28, 2008, available at The Decree newly stipulates that intermediary financial institutions and individuals affiliated with institutions involved in the evaluation and auction of SOEs are barred from buying a stake in SOEs. (Foreign Investors Given More Access to SOEs, VIETNAM NEWS AGENCY, Oct. 21, 2008, available at

When an SOE is transferred, a three-year minimum period is imposed to ensure workers' jobs and full payment of social insurance, as well as to maintain the SOE without selling, leasing, or dissolving it, except in case of bankruptcy. “Transfer” of an SOE under the Decree refers to the change of ownership of the enterprise, without collection of money, to the labor collective, “with clear definition of ownership by each member.” ( Decrees Boost Wages, SOE Sales, VIETNAMNET BRIDGE, Oct. 23, 2008, available at

According to London-based BUSINESS MONITOR INTERNATIONAL (BMI), the SRV “has faced an uphill struggle in transferring companies in the vast state-owned sector to private hands,” due in large part to its ongoing reluctance to allow foreign investors a controlling stake in “'blue-chip' SOEs in key sectors.” It further reports that in the first eight months of 2008, citing to the SRV's National Steering Committee for Enterprise Reform, “only 80 SOEs, 15% of the government target, were privatised.” (BMI, supra). Vietnam News Agency, the official news service of the SRV government, contends that the Decree's issuance will increase opportunities for foreign involvement in the purchase and sale of SOES and “heat up the merger and acquisition (M&A) market in Vietnam.” In the view of BMI, however, the new Decree “has failed to disperse uncertainty over the framework for foreign investments in 'equitised' SOEs” and applies to “mostly smaller SOEs in which foreign investors have little interest.” (BMI, supra.)