The government plans to sell 10 per cent to 15 per cent of the national carrier, most likely after an initial public offering in September, Deputy Transport Minister Nguyen Hong Truong said in Hanoi on Friday. The airline is valued at 57 trillion dong ($2.9 billion) by Morgan Stanley and Citigroup, Mr Truong said.

The national carrier is among more than 400 state-run companies Vietnam will equitise next year to boost productivity and restructure the economy. Prime Minister Nguyen Tan Dung is considering raising foreign ownership caps at listed companies.

Vietnam lacks money, said Mr Truong. Vietnam lacks advanced technologies and markets, so bringing in foreign strategic investors will help our state companies to grow.

The airline is talking to potential investors including airlines and financial companies from Singapore, Thailand and Europe, he said.

The government has given approval for Vietnam Airlines to sell a 25 per cent stake, which includes sales to strategic investors and shares at the float, Mr Truong said. Mr Dung still needs to sign off on a plan for the sales, with a final shortlist of foreign investors expected next month, he said, and was confident the airline would be able to sell the full stake.

A successful offering of the national carrier would boost the government's push for share sales of other state companies, said Marc Djandji, a partner at Ho Chi Minh City-based Asean Strategy Group.

Vietnam Airlines would be a flagship equitisation, Mr Djandji said. It would put the process of equitisation back on the map for Vietnam. If it finds a strategic investor and the sale happens, it will give some confidence back to investors.

Foreign investors participated in only one of Vietnam's two dozen floats of state companies before April 23, according to exchange data. The government raised 1.36 trillion dong from the floats, about 35 per cent of its target of 3.9 trillion dong, according to data from the nation's stock exchanges.

The transport ministry also plans to sell stakes in eight ports now held by Vietnam National Shipping Lines this year and the parent company will hold a float early next year, Mr Truong said.

The government has approved Samsung Heavy Industries' purchase of as much as 50 per cent of a shipbuilding company held by Shipbuilding Industry, formerly Vinashin, in Cam Ranh Bay, according to Mr Truong. The South Korean heavyweight is also interested in buying a stake in Ha Long Shipbuilding, he said.

It's crucial for us to have the planned share sales done successfully to send a clear message to international investors that we really want them to come, Mr Truong said. We have improved the stake sale process with better evaluation methods and are determined to sell stakes in these companies.

Vietnam is accelerating sales of state shares as part of efforts to bolster an economy the World Bank estimates will expand 5.4 per cent this year, a seventh straight year of growth below 7 per cent.

Prime Minister Dung in March instructed ministries to speed up public share sales in state enterprises and spur these companies to focus on core businesses as the country's economic growth slowed and its financial system came under pressure from south-east Asia's highest level of bad debt.

The government has been trying to boost competitiveness in the state sector, which the International Monetary Fund last year said was a key source of economic vulnerability. State companies use up about 50 per cent of public investment, tie up 60 per cent of bank lending and account for more than half the nation's bad debt, according to the finance ministry.

Bloomberg - May 24, 2014