Vietnam needs stock exchange

Vietnam needs stock exchange

By John Rogers

HO CHI MINH CITY, Vietnam (Reuter): Vietnam needs its first stock exchange to speed up privatization, says the chief executive of one of the three state-owned companies successfully sold off to shareholders so far.

People were concerned they could not trade shares easily, said Nguyen Thi Mai Thanh, General Director of Refrigeration Electrical Engineering Corporation (REE), which converted in December 1993 to ownership by shareholders from ownership by the local authority in Ho Chi Minh City.

"We need a market where we can sell and can buy," Thanh told Reuters in an interview this past week. She said she had told government and business leaders that selling shares was the best way to raise capital -- "very easy, no risk".

But officials say Vietnam's stock market, probably trading initially in government bonds and later in company shares, will not start operating before the end of this year or in 1996.

"Privatization is slow, the market is slow," Thanh said. "The government is willing to proceed more quickly. But it's still too slow."

New rules were needed now that "equitisation", the process of selling off state-owned companies to shareholders launched in 1992, had gone beyond the pilot stage, she said.

At least four or five more companies in Ho Chi Minh City wanted to proceed with equitisation, she said, following the example of REE, Hiep An Shoe Company and the General Forwarding and Agency Company, Gemadept.

Following closures and mergers, communist-ruled Vietnam now has about 6,000 state-owned firms, half the 1990 figure,

But privatization has been slow for a host of reasons, including debts and financial complications that make valuation difficult and fear on the part of managers and workers over loss of security and benefits.

Equitisation suffered a setback when one of the first companies readied for sale, high-profile garment-maker Legamex, halted the process after its chief executive was sacked and arrested on mismanagement charges last year.

REE is Ho Chi Minh City's main installer of air-conditioning systems, much in demand in Vietnam's construction boom.

The firm was well-placed when it started equitisation in September 1993. It turned a tidy profit, had no financial complications and was highly motivated to take advantage of market-orientated reforms.

"In the state-owned stage, we always tried to make the company more efficient, but we thought it was not dynamic enough," said Thanh, 42, who has worked for REE since she returned from engineering studies in East Germany in 1982.

The shares in REE, valued at 16 billion dong ($1.5 million) in 1993, were sold within a month. Staff bought 50 percent and the public 20 percent, while the Ho Chi Minh City People's Committee retained 30 percent.

Turnover rose from 45 billion dong ($4 million) in 1993, before equitisation, to 75 billion dong ($6.8 million) in 1994.

It is projected to double this year, Thanh said.

Profits rose from 7.5 billion dong ($681,000) in 1993 to 11 billion dong ($1 million) in 1994, and are expected to rise to 15 billion dong ($1.36 million) or more this year.

The work force has grown to 470 from 300 in 1993, and salaries have risen almost 30 percent since equitisation. REE is discussing a joint venture with the U.S. giant Carrier Corp.

"Things look very rosy for REE," said a foreign consultant. "It is very well-positioned in terms of market growth. If you look at all the construction going on, the demand for air- conditioning will experience major growth."

Thanh doubts estimates by foreign analysts that REE's value has tripled or quadrupled since equitisation, but says its worth could have increased 1.5 times.

"Maybe if we had a stock market, it would change very quickly," she said. "The shareholders would be happy. But maybe if the value increased so much, it would be difficult to sell new shares... We would become very expensive."

Thanh says privatization has been good for the government as well as shareholders and workers.

"Since privatization, turnover and profits have increased, and we pay more taxes. It's good for the people, good for the government," she said.