ADB offers US$630 million for State sector reform

The Asian Development Bank on Monday approved a multi-stage program to provide US$630 million to Vietnam to reform State-owned enterprises, the regional bank said in a statement.

Under the program meant to facilitate governance and reform of State-owned enterprises, the bank will provide US$600 million from its Ordinary Capital Resource to strengthen local State firms’ balance sheets, the Vietnam News Agency reports. The remaining US$30 million will be sourced from the Asian Development Fund to improve management capacity of selected State companies.

The huge funds are aimed at “strengthening their balance sheets, rationalizing corporate structure, streamlining management processes and increasing transparency to internationally-acceptable standards,” the bank said.

In the first stage, the Manila-based bank will supply US$120 million from the Ordinary Capital Resource (OCR) and US$10 million from the development fund. The OCR loans will carry an interest rate equivalent to the LIBOR rate, while the other US$10 million will have a term of 32 years and an annual rate of 1.5%, which is reduced to 1% a year for a grace period of eight years.

This amount will be used to assist Song Da Corporation in converting its affiliated infrastructure enterprises, and to help the Southern Waterway Corporation to develop its logistics service.

The program will provide training and other technical assistance forms to Government agencies related to the State-sector reform, such as the State-owned Debt and Asset Trading Corporation, according to the news agency.

The ADB loans will account for some 36% of the total amount of US$1.77 billion required for the State-sector reform to the year 2015. The remaining amount will be sourced from the State Budget, contributions from those State companies selected to join the program, as well as capital from strategic investors seeking to buy into these State-owned companies.

This program plays the core role in the Government’s process of transforming State-owned enterprises into shareholding concerns. The ADB assistance, therefore, will facilitate this process by turning selected State-owned enterprises more attractive to international investors.

Tags: Vietnam investment