FIEs invited to raise hand to go public

“We are receiving documents and the ministry invites more foreign investors to submit their applications,” said deputy director of the Ministry of Planning and Investment’s (MPI) Foreign Investment Agency, Nguyen Anh Tuan.
Tuan said his agency was considering the eligibility of 21 foreign-invested enterprises (FIEs) for conversion into shareholding companies, including 12 operators in the manufacturing sector. Seven applications are from the agricultural and food processing industries, the remainder are in the service sector.
The FIEs include seven wholly foreign-owned companies, favourites in the FIE equitisation process due to the procedural simplicity of their transformation. The 14 other contenders are all joint ventures, with three of them having Vietnamese partners contributing capital to the businesses in the form of land-use rights.
Capital contributed as land-use rights is viewed as a major procedural obstacle for those wishing to become shareholding companies. Joint ventures in which parties lease land from the State to contribute capital as land-use rights will have to complete procedures for certifying their capital by calculating the value of the land-use rights contributed to the joint venture. In this case, the book value of the land-use rights can be significantly different from their actual value to the enterprise, and this can distort the valuation and share price.
Interested FIEs may also face difficulties relating to legal provisions on the non-refundable transfer of assets to the Vietnamese party on the termination of the projects.
Under Provision (a) of Article 1 of Circular No.08.2003/TTLT-BKH-BTC issued by the MPI and the Ministry of Finance to detail the implementation of Decree 38/2003/ND-CP on the transformation of FIEs into shareholding companies, FIEs will not be eligible for official consideration for transformation if their foreign partner or partners have pledged to transfer their assets to the Vietnamese State and their Vietnamese partners on a non-refundable basis.
Some joint ventures have therefore had to arrange negotiations between their Vietnamese and foreign partners to amend the asset transfer stipulation in their investment licences. However, this procedure requires extra time.
“So far we have not submitted the transformation document [to the MPI] because auditing procedures have not completed and we have to settle the non-refundable transfer issue,” said, the deputy general director of the Fortuna Hotel Hanoi Joint Venture, Nguyen Quoc Tuy.
He said his joint venture’s management board had to reach an agreement on the amendment to the stipulation on non-refundable asset transfer.
“The issue is being addressed and we will try to complete all required documents before March 25 to submit to the MPI,” he said.