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| Hai Phong port. — Photo laodong.com.vn |
Minh Khue
On September 21, the Prime Minister of Viet Nam agreed to permit Vinalines to slash its ownership of the Port of Hai Phong JSC and Sai Gon Port JSC to as little as 20 per cent of their charter capital. Accordingly, some 74.68 per cent of the Hai Phong Port's shares may be available for purchase. As announced by the government, the aggressive unloading plan aims to significantly reduce state ownership to make the key ports more alluring to strategic investors and radically improve corporate governance, efficiency and the competitiveness of the divested ports.
Leading Vietnamese property developer Vingroup, Vietinbank and the State General Reserve Fund of Oman (SGRF) - a sovereign investment fund established in 1980 to manage Omani government reserves - have expressed interest in buying shares of the Hai Phong Port. While the SGRF, through its Vietnam Oman Investment joint venture with the State Capital Investment Corporation, proposed buying the available state shares that Vinalines was allowed to strip (i.e. 29.68 per cent so far) in 2014, Vingroup proposed buying 80 per cent of the port's shares in March 2015.
Earlier this month, Vinalines proposed the criteria for selecting a strategic shareholder should include (i) strong financial capability, without using debt to finance the acquisition; (ii) at least 3 years of experience in investing in, managing or operating a deep-sea port; (iii) a detailed post-investment improvement plan spanning 3 years; and (iv) a commitment to co-invest in the Hai Phong International Gateway Port in Lach Huyen (if licensed). As expressed by Vinalines' representatives, the criteria singled out truly capable strategic investors who can co-operate with Vinalines in effectively managing the Hai Phong Port and co-investing in the Lach Huyen deep-sea ports.
The conditions showed Vinalines' preference for SGRF, who supposedly held the advantage over the other two local companies because of SGRF's investment experience with deep-sea ports worldwide. It is rumoured that SGRF has also proposed a strong commitment and detailed plan for post-investment improvement and co-investment in terminals at the Lach Huyen deep-sea port. SGRF, however, can only hold a maximum of 49 per cent of Hai Phong's Port, under the current regulations of Viet Nam.
Despite its lack of experience with deep-sea ports, Vingroup has been deemed the stronger candidate of the two domestic investors. In 2014, it recorded total assets and revenue of more than US$4 billion and $1 billion, respectively. It is also particularly prominent due to its long list of successful projects nationwide in certain areas, such as real estate, hospitals, retail, agriculture and commerce. As one of the most dynamic and successful non-state consortiums in Viet Nam, it is believed to be able to effectively employ its high discipline, modern administrative management model to increase the port's business efficiency. Additionally, the acquisition is consistent with the government's strategy of enhancing the capacity of local corporations and establishing local conglomerates of global caliber.
The divesture by the Government will not be an easy task, especially with regard to inviting and selecting the best strategic investor(s) to achieve its targets and later attract investment capital for the development of Viet Nam's seaports. The Government will certainly need a careful divestiture plan and strategic investor selection criteria. This is clearly good news for Hai Phong Port and the port industry in Viet Nam, and it can be reasonably expected that Hai Phong Port will soon step into a new phase of development.