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Opportunity out of Diversity: Equitization of Vietnamese State Owned Enterprises. Will you be left

The interruption of Covid19 is well documented. The economic challenges it has presented will be demanding. However, the opportunity times like these bring for astute business executives are significant.At the forefront of these dynamic times is Vietnam.

As a growing Tiger Economy, Vietnam has been on every forward thinking executives radar for a number of years, but have they reacted? Some have, and successfully so. Over the past five short years Vietnam has equitized a number of its State Owned Enterprises. To date, 200 state owned enterprises have opened up to or are currently working through equitization, representing a mere 27% of Vietnam's 2015-2020 Equitization Plan. This clearly highlights the opportunities that abound for the perceptive global executive. Whether wishing to intensify their footprint in South East Asia, or for the new player with aspirations of expanding existing operations or to merge in to this growing global market of opportunity. Correspondingly, this also highlights how the Socialist Republic of Vietnam is very much, open for business!

Equitization of Vietnam's state owned enterprises represents billions of dollars of partnershipinvestment. Brands such as Vietnam Rubber, Becamex, Vinafood, VTVcab and Vinamilk, are some of the regions most successful business operations and are well known examples of successful equitizations. Equitization of state owned enterprises create diversity through fund raising to increase efficiencies and expansion. Through equitization management structures become streamlined, innovation is not only enhanced it is strongly encouraged through technology transfer. Coupled with access to an ever-increasing commodities market and stock market penetration, equitization of Vietnam's state owned companies represent enormous opportunity. Although a challenging process, the long-term benefits far outweigh the administrative hurdles one may encounter along the way. Yes, equitization takes time. Yes, the state still plays a management role after equitization. And yes, initial growth rates during the initial settling in stage can be sluggish. However, Vietnam, through its Decree 26/2019/QD-TTg has clearly stated,“that a further 93 SOEs must have completed their equitization targets for 2020”. Some of these industry sectors include…

Real-estate Construction Mining Industrial services Environment Transportation Healthcare Tourism Agriculture Banking Technology Telecommunications Media & entertainment Power& energy At first glance, the process for equitization can appear quite cumbersome, however, the carefully laid out, and relatively straightforward steps are as follows…

Step 1 – Develop Step 2 - Implement Step 3 - Finalize

To summarize, and to echo the World Bank outlook on Vietnam…

“Vietnam’s shift from a centrally planned to a market economy has transformed the

country from one of the poorest in the world into a lower middle-income nation.

Vietnam is now one of the most dynamic emerging countries in Asia”.

Vietnam is experiencing rapid demographic and social change. Its population reached 97 million in 2018, up from approximately 60 million in 1986, and is expected to further increase to 120 million by 2050. Today, 70% of the population is under 35 years of age with a life expectancy of 76+/- years, the highest among countries in the region at similar income levels. But the population is rapidly aging, with an emerging middle class, currently accounting for 13% of the population, is expected to reach 26% by 2026.Vietnam ranks 48 out of 157 countries on the human capital index, second in ASEAN behind Singapore making Vietnam’s HCI the highest among middle-income countries.

For those considering Vietnam as a part of theirbroader investment strategy, allow Vietnam Global Connect the opportunity to discuss, introduce, and assist you with your due diligenceprior to connecting your business with potential partners in Vietnam.

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