Firms hesitant on foreign cap

The general meeting season of 2016 is coming to an end with Vinamilk under the spotlight. The Vietnamese dairy giant has dropped seven conditional business lines, which allows foreign investors to hold as much as a 100% stake in the firm.

However, some listed firms have not been able to increase their foreign ownership limits because of restricted business lines such as banking, retail and certain transport services.

Do Van Minh, general director of Ho Chi Minh City-based General Forwarding and Agency Corp (Gemadept), said that his company would like to team up with foreign investors and spur more foreign investment.

However, they are operating some conditional business lines including inland-waterway and sea transport so are unable to raise the cap to 100%.

“Gemadept is also concerned with any obstacles that may arise following the equitisation, as the firm now holds 49% of the charter capital in an inland transport company. Gemadept is waiting for further guidance to make a final decision,” he added.

Until now, there is no official list of business lines and industries with conditions applicable to foreign investors. The new Investment Law 2014 provides a list of 267 conditional business lines and industries,  but this is not the list referred to by Decree 60/2015/ND-CP.

Decree 60 stipulates that local listed firms, except for those involving in conditional business lines, can raise foreign ownership to 100%.

Many Vietnamese listed firms are operating in several business lines and industries with different provisions on the foreign ownership ratio so it can prove complicated and time-consuming for them to adjust all their business lines.

Thanh Cong Textile Garment Investment JSC (TCM) has delayed its plan to ease the foreign cap. At its annual general meeting, leaders of the firm said they are considering whether to remove the foreign ownership cap.

TCM is involved in various fields including real estate and retail, which are on the list of conditional business lines. TCM and its major shareholder, Eland group, would like to boost its fashion retail segment to tap into the huge market potential.

Therefore, easing the foreign cap will create problems for the expansion of its retail network.

The TCM board of directors is weighing up the potential benefits of easing foreign ownership in contrast to exploring lucrative business lines.

The firm is awaiting guidelines to see whether it can lift the cap to 100%, or at least higher than its current limit.

To facilitate the lifting of the foreign ownership cap, investors and experts suggested that the government should minimise the number of conditional business lines. For firms dealing in restricted business lines, the government could set a specific foreign ownership ratio.

According to the Investment Law 2014, ministries, sectors and localities are not allowed to issue business conditions.

The existing business conditions stipulated in circulars from ministries will become invalid from July 1, 2016. Instead, there will be a decree on business conditions to substitute the circulars from that date forward.