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.