SOE share sell-off gets mixed review
24-10-2013
VAFI claimed selling off the government’s stake in state-owned enterprises would raise $5 billion
The Vietnam Association of Financial Investors (VAFI) recently advised the government to sell additional stakes in well-performing state enterprises and to
off-load more high-street real estate in order to replenish the state budget.
VAFI proposed that Hanoi and Ho Chi Minh City authorities should sell their stakes in outstanding properties located in the city centres, in order to raise finances to invest in infrastructure.
Properties would include shopping centres, big hotels managed by state-owned enterprises or city stakes in joint ventures. City authorities currently hold stakes in the Hanoi’s Daewoo and Metropole, and Ho Chi Minh City’s Rex and Caravelle hotels.
John Sheehan, management consultant from Global Commercial Real Estate based in Hong Kong said that the idea of selling ownership stakes in well known, city centre hotels made complete sense.
“Hotels are best run by hospitality professionals, while reinvesting the money in better public infrastructure would also improve the city for the benefit of all the people and the local economy,” Sheehan told VIR.
However Sheehan suggested the government should however be careful when considering the proposal.
“For me the big issue is to make sure that the hotels are sold in a transparent manner through competitive bidding where the best price is achieved. Involving foreign investors will make sure that the Vietnamese people will achieve the highest price on sale,” he said.
“Best price, highest and best use, which creates additional funds for expenditure in better public facilities, is a win-win for everyone,” he said.
According to VAFI secretary general Nguyen Hoang Hai, the bitter management lessons provided by the Vinashin and Vinalines disasters, in which the state had to pay roughly $7 billion to learn, definitely stand. If the government stonewalls the sales, their asset values would collapse and they will have to make further borrowings to invest in the economy.
Leon Cheneval, associate director, CBRE Vietnam, said cities in general implement plans to fund infrastructure and selling assets is one of several options. Development fees can be charged, as can taxes on well-structured public infrastructure plans, so selling assets is not necessarily the immediate answer or solution.
He said cities could consider relocating some schools, hospitals and ministries from the city centre thereby improving community facilities on what would be less valuable but more accessible land, while utilising prime city centre sites for a combination of public-private development with a strong emphasis on beautifying the city.
Su Ngoc Khuong, associate director of Savills Vietnam’s investment department also said the sale of city stakes in prime properties was only one of many choices that the government could make.
He said although investing into infrastructure was crucial to the development of the cities, it was too early to conclude whether sale of a city stake in prime properties was a good solution or not. More important was how the proceeds from the sale of the assets would contribute to fund-raising and how the funds would be utilised.
“We also have to take into account the fact that those properties have been allocated to state-owned enterprises, and as a result there would have to be some consideration involved at a corporate level. The pros and cons should always be considered in both the medium and long term to determine the best strategy to raise funds for the state budget,” said Khuong.
http://www.vir.com.vn/news/en/property/soe-share-sell-off-gets-mixed-review.html
