Vietnam has approved removing foreign ownership caps on most listed companies, its finance minister confirmed on Friday, scrapping a 49 percent limit in one of its most liberal economic reforms yet. The communist government is stepping up reforms to the $184 billion economy after years of delay that have frustrated foreign investors keen to tap the potential of its private sector, with future Pacific and European Union free trade pacts adding to the allure.
Prime Minister Nguyen Tan Dung had signed an amendment to the rules, Finance Minister Dinh Tien Dung said in a text message after state-run Vietnam TV (VTV) reported the decree's approval without saying when the change would come into effect. VTV said the rules would not apply to certain firms or sectors in which the state needed to retain controls, without elaborating. The amended decree has not been made public. Long criticised for protectionism, Vietnam has eased foreign restrictions in areas such as banking and property and is pursuing the part privatisation of hundreds of state-run firms, from airports and textile companies to breweries and ports, which will eventually list on its stock markets.
Some experts say the reform momentum reflects support within the ruling party for a more open economic agenda being pursued by its progressives, keen to lure foreign capital to boost local companies and position Vietnam as a manufacturing centre for the likes of Samsung, Microsoft and Intel.
Duong Vuong, a director at asset manager VinaCapital, said foreigners were interested in the market but had long been shackled by ownership limits. "Everyone has been waiting for this for a long time ... It's good timing with everything going on in Vietnam." The new regulation would make Vietnam's market one of the region's most liberal and similar to Indonesia, which also restricts certain sectors. Foreign ownership is mostly limited to 40 percent in the Philippines and 49 percent in Thailand.
Debate on raising the ownership cap has dragged on for nearly two years, with the initial plan being to raise the foreign ceiling to 60 percent. That was reviewed earlier this year by the State Securities Commission. Investors have complained foreign shareholdings in Vietnam's most attractive firms are perennially at the ceiling. Companies in which foreigners have their maximum share include FPT , Refrigeration Engineering Corp, Ho Chi Minh City Securities and Vinamilk. The government previously said sectors that are off-limits to foreigners included those related to national security.
Vietnam has two bourses, the Ho Chi Minh Stock Exchange with a market capitalisation of $50.3 billion, and the smaller Hanoi Stock Exchange, with equities valued at $6.5 billion. That compares with Thailand's $419 billion and Indonesia's $345.7 billion. VinaCapital said the move would be a game-changer. "It will open Vietnam up to the world making the market more competitive, accessible and investor friendly."
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