Businesses need to check WTO commitments before selling stakes to foreigners

  • July 11, 2015

Since the government Decree No 60 officially lifted limitations on foreign ownership ratios, Vietnamese businesses have been looking forward to the Ministry of Finance’s circular guiding its implementation.

Vietnam, WTO, Decree 60, foreign ownership ratio

Under the Government Decree No 60 dated June 26, 2015, the foreign ownership ratio is not limited in public companies in some certain business fields. Some of them have checked a list of 267 conditional business fields stipulated in the Enterprise Law which took effect on July 1, 2015 and the legal documents released by the Ministry of Planning and Investment. The concerns of listed enterprises are understandable. A clause of Decree No 60 says in case the regulations of the Decree No 60 are contrary to the provisions in international treaties of which Vietnam is a member. This means that enterprises will be able to automatically offer more room to foreign investors while there is no need to amend enterprises’ regulations. Foreign investors now hold 49 percent of Vinamilk’s shares, the ceiling for foreign ownership ratio under the old regulation.  Meanwhile, the State, through the State Capital Investment Corporation (SCIC), holds 45 percent of shares. To implement Decree No 60, Vinamilk, like the other listed companies, will have to convene a shareholders’ meeting or consult with shareholders’ in written documents about the new foreign ownership ratio, and then amend the company’s regulations. The representative of a foreign investment fund fears that SCIC, as the biggest shareholder, may disagree with the proposal to raise the foreign ownership ratio to 100 percent.  Prior to that, SCIC stated late last year that it will not withdraw capital from Vinamilk. Will the foreign ownership ratio limit in Vinamilk be lifted? In this case, it will be important to check the regulations in international treaties about  foreign ownership ratios in dairy production.  In case the regulations say foreigners can hold up to 100 percent of stakes in dairy businesses, Vinamilk will not have to amend the company’s regulation, while it can automatically lift the foreign ownership ratio to 100 percent. Investors’ other major interest is the banking sector. A senior executive of a US fund questioned if the foreign ownership ratio in Vietnamese banks will be lifted. Under the decree, total foreign ownership ratio in one bank must not be higher than 30 percent. However, Vietnamese Prime Minister Nguyen Tan Dung, in a dialogue with US businesses during his visit to the US last year, mentioned the possibility of Vietnam lifting the ceiling foreign ownership ratio in banks to 49 percent.

Source: VietNamNet

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