Foreign private-equity firms hope for big profits in Vietnam

Foreign private-equity firms hope for big profits in Vietnam

Standard Chartered Private Equity has poured money into a Vietnamese restaurant chain and is planning another investment deal, while Mekong Capital and Dream Incubator are preparing new campaigns to raise funds to begin a new adventure.

Last year, the fund bought 3.04 percent of shares of FPT, Vietnam’s largest technology group, and also bought 1.09 million shares, or 4.71 percent of PAN, a company in the agricultural sector.

Norges Bank of Norway, which is the country’s top investment fund with total assets of $686 billion in 2012, showed major interest in Vietnam when it invested in many Vietnamese companies, including Vinamilk (the dairy producer), Hoa Phat Steel and DPM, a fertilizer and chemicals corporation.

Last year, the US-based Warbug invested $200 million in Vingroup, the largest real estate group in Vietnam, while Singaporean Mapletree spent $54 million to buy the Center Point building in HCM City, and TPG spent $49 million to acquire 49 percent of Masan Agriculture, a subsidiary of Masan Group.

Observers noted that opportunities available in Vietnam are great, as state-owned enterprises have been told by the government to withdraw capital from joint-stock companies and focus only on their core business fields. In addition, commercial banks have been forced to undergo a restructuring process.

Dealmarket, an information website for private funds, also commented that South East Asia is a promising destination point for investors.

However, analysts said that in Vietnam, like other frontier markets, investors seeking big profits will have to accept high risks.

The Vietnamese real estate market is still stagnant despite great efforts by the government to pump more capital into it. Meanwhile, the banking system is still under a restructuring process.

To attract more investment, Vietnam has decided to open the door more widely to foreign investors. However, the policy on lifting the ceiling foreign-ownership ratio in Vietnamese companies and on allowing foreigners to buy houses in Vietnam are still on paper.

Investment funds consider the country’s population of 90 million and improved living standards as two promising features. However, reports all show that the average income of Vietnamese is still at a “low average” level.

Meanwhile, no one can say for sure if the income of Vietnamese will increase sharply in upcoming years.

Analysts point out that it would be a great challenge for Vietnam to obtain annual high economic growth rates of 7-8 percent again.

The World Economic Forum’s 2014 global competitiveness report showed that Vietnam ranks 68th among 144 ranked nations.

Vietnam ranks highly on the consumption market scale (34th), but stands at a low position, 106th, in the complexity of the business environment, and other criteria.

Thus, except for funds that have been present in Vietnam for a long time, including Dragon Capital, Mekong Capital and VinaCapital, newcomers like Standard Chartered might find it difficult to adapt to the conditions in Vietnam.

vietnamnet