Hanoi (VNS/VNA) -Three years after a groundbreaking decree opened public companies to foreignownership, less than 4 percent of eligible firms have removed their foreignownership ceiling.

Passed in June 2015, Decree No60/2015/ND-CP removed limits on how many voting shares foreign investors canbuy in public Vietnamese companies. Previous regulations had capped foreignownership at 49 percent.

Thanks to the decree,enterprises can set their own limits. Some conditional business lines, such ascommercial banks, will retain their existing 30 percent limit.

When the decree passed,regulators expected it to provide a major boost to the securities market and tospur private equity activity in Vietnam. It was meant to enhance the liquidityof Vietnamese businesses and facilitate exit strategies for investors.

However, three years afterimplementation, only 25 out of the 740 companies listed on Vietnam’s twoexchanges – about 3.4 percent – have completed the process to remove their capon foreign investment.

This number does not accountfor the more than 770 companies trading on the Unlisted Public Company Market(UPCoM).

“Current regulations do notallow total foreign ownership in all industries,” Pham Tien Dung, deputy headof analysis at Bao Viet Securities Co, told VietnamNews.

“Many firms that want to raisethe limit will need to eliminate some business lines,” he said, “so companieshesitate when deciding to relax their caps,”

Dung also said it was not easyto attract foreign capital without showing convincing business metrics, even ifa company wanted to raise foreign ownership.

Executives of some businessesthat are profitable enough to entice investors do not want to remove theirforeign ownership cap for fear of losing control of their companies.

Most firms that have elected torelax their cap are in the securities, food and pharmaceutical industries.

Some large companies that havetaken this step include Saigon Securities Inc, HCM City Securities Co,Vinamilk, PAN Group, Vinh Hoan Corp, Binh Minh Plastics Co and DHGPharmaceutical.

However, not all of the 25companies that have relaxed the cap have seen a major change in the makeup oftheir ownership groups. Only eight have seen their level of foreign investmentrise above 49 percent.

Some of the aforementionedcompanies have undeniably benefited from the State capital divestments madepossible by the new regulations, such as Vinamilk and Binh Minh Plastics Co.All of their stakes offered in the share sales were combed by foreign investorsafter removing the cap on foreign ownership.

However, some companies havehad to give up business lines to raise the ownership limit. DHG Pharmaceuticalhad to give up its drug distribution network to meet the conditions for raisingforeign investment.

“In the short term, it is truethe elimination of some business lines will lower profits for these companies,”Dung said.

While over 1,500 companiestrade shares through official and unofficial stock exchanges, the quality oftheir offerings vary widely. Some are undeveloped, and many stocks are notconsidered tradable.

When companies do succeed inraising foreign investment, Dung worries they could experience unforeseenchanges.

“I think there should be moreequitable treatment of domestic and foreign enterprises so operations are notforced to change too much after foreign ownership rises above 50 percent,” hesaid.-VNS/VNA