Basic foundations for confidence

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According to Grant Thornton Vietnam's report firm's bi-annual survey “Private Equity in Vietnam-Investment Sentiment and Outlook” during the second quarter of 2011 canvassing the opinions of over 800 decision-makers based in Vietnam or those having a significant focus on Vietnam, although optimism for the next 12 months is lower than the last quarter of 2010, the outlook sentiment is still generally positive with 53 per cent of all respondents holding a positive view.

Although there has been a slight drop in investor confidence from 2010, 54 per cent of respondents indicated that Vietnam remains more attractive than other investment destinations for funds. This optimistic outlook is also supported by 53 per cent of respondents who plan on increasing their investments in Vietnam over the next 12 months.

Trinh Kim Dung, advisory services senior manager from Grant Thornton Vietnam, said: “With continued strong domestic growth in Vietnam, most investors still sit on the positive side of the fence. Many fund managers have been actively promoting their new investment funds to global investors, seeking fresh capital to underpin private equity investment in the near term.”

Education has returned to top of the list of the most positive sectors for investment, replacing retail which led the previous survey, according to the survey.  Of most interest from the results was the improvement in the attitude towards oil, gas and natural resources as well as agriculture. In the previous survey, oil, gas and natural resources along with agriculture were the least positive sectors. However, in the second quarter of 2011 survey respondents indicated a strong positive turnaround. Transportation and logistics, on the other hand, has fallen dramatically to be the least preferred sector.

Some 26 per cent of respondents said that their preferred entry price would be a 3x to 4x multiples of earnings when making investments in Vietnam, whilst 42 per cent of respondents believe that the exit multiples will increase compared to the current period.

Consistent with recent surveys, government red tape, corruption, infrastructure and the legal system continue to be the main areas of complaint from investors in Vietnam. Corruption is considered to be the most serious impediment to investment in Vietnam according to 79 per cent of participants.

Matthew Lourey, advisory services director said: “Over the past few years, Vietnam’s legislative framework has continued to evolve. However, transaction procedures and practices have not been simplified, partly due to contradictory regulatory releases, preventing Vietnam from becoming a far-more attractive investment destination than it currently is”.