Vietnam airport firm IPO rare bright spot in sluggish privatization drive
A US$1.2 billion airports operator going public in a country with one of the world's fastest growing air travel markets proved an attractive deal for foreign investors, who have largely shunned Vietnam's privatization drive due to the meagre stakes on offer.
Foreigners snapped up 82% of the meagre 3.47% stake in the Airports Corporation of Vietnam (ACV) that the government had offered in an initial public offering on Thursday, even though there is no timeframe for a stock market listing.
The sale raised a higher-than-expected US$51.6 million, a rare success story for a government that has struggled to bring both local and foreign investors into the state-owned enterprises (SOEs) it wants to make more efficient to reduce a government debt burden that the World bank estimates will account for just over 60% of GDP this year, and 63% in 2016.
ACV controls all of Vietnam's major airports, which have seen passenger numbers climb an average 16% a year since 2012.
"The main reason for the sluggish sales of stakes is the lack of information available to potential investors, hence there's a lack of trust and much doubt," Dang Quyet Tien, the finance ministry official tasked with revamping the privatization programme, told Reuters, adding that the government was working on new measures to improve the process.
Official data shows the government has raised only half of the 8.7 trillion dong (US$387.2 million) it had targeted from privatizations in 2015 with just over a month to go before the year ends. Stakes were also sold in 182 firms, just over half of the 289 targeted.
Putting investors off are the SOEs' high debt levels, poor management and the government's insistence on maintaining a controlling stake.
Even strategic investors that the government is courting with a 20% stake have stayed away as they know they will have little say in how the business is run, analysts said.
"Success rates have usually been low," said analyst Do Quang Hop of Saigon-Hanoi Securities. "Strategic investors generally want to manage or control the business."
In a bid to speed up the process, privatization official Tien said the government had ordered SOEs to reduce their debt, sell non-core assets and hold overseas roadshows to attract investors, adding that the government would no longer guarantee loans.
Some lawmakers, however, don't think there is a problem.
"What's the point of rushing?" Tran Du Lich, a member of parliament's economic committee, told Reuters. "The most important goal is to change companies, renew the corporate governance, enhance effectiveness and expand."