Blog Vietnam: new government, fresh opportunities?
“This is a good time to revisit Vietnam,” said Lito Camacho, Vice Chairman, Asia Pacific, at Credit Suisse, during the Vietnam investment panel on April 6. One key attraction is the apparent determination of the incoming government – a new president and prime minister – to push ahead with reforms, particularly the renewal of State Owned Enterprises (SOEs) and equitization (privatization Vietnam-style). After a record inflow of foreign capital in 2015 ($14.5 billion, up 17.4% from the year before), the government published a list of 17 sectors it is opening up to overseas investors, including real estate and services in tourism, transportation, construction and healthcare.
“The economy will improve with the coming of the new government,” said Le Thi Bang Tam, Chairwoman of Vinamilk and HD Bank. Added Nguyen Duy Hung, Chairman and CEO of Saigon Securities Inc.: “After 15 years of reform, there is awareness by the government of the market economy. Once the government accepts the international game, we can’t play on our own anymore.”
While the equitization of state firms will progress, the government is not planning on rapid sales of stakes at cheap prices, Tam explained. Rather, it will take time to reshape SOEs and consolidate sectors so that companies that are equitized are stronger and more valuable. State enterprises must do a lot to improve governance and transparency, she observed.
Investors have also noticed that Vietnam is part of the ASEAN Economic Community (AEC), launched at the beginning of this year, and the Trans-Pacific Partnership (TPP) agreement among 12 member economies, including the US and Japan, which the government estimates could boost total exports by $68 billion by 2025. “TPP brings opportunities and challenges,” Tam told participants, explaining that opening up will put pressure on Vietnamese enterprises to become more competitive. Infrastructure, clean energy, finance, agriculture and nutrition, including food safety, could offer opportunities for foreign investors, Hung indicated.
Investors are responding positively to Vietnam’s efforts to attract capital. According to Jeffrey Perlman, Head of Southeast Asia at Warburg Pincus, Vietnam will be a key long-term focus for them in the region. Especially compelling narratives, he said, are the rising domestic consumption driven by the country’s growing middle class and the “transformative shift” of China’s manufacturing base as costs rise, which is benefiting Vietnam.