Nation urged to harness FII potential enterprise

Foreign indirect investment helps local firms raise competitiveness

“The rate is too modest in comparison to that of other regional countries, and the needs of Vietnam relating to economic development,” said one expert.
The lack of proper policies for FII, and the limitations of currency conversion, were given as major factors accounting for the low level of FII.
“Vietnam is not inferior to any country in the world in terms of wooing FDI capital. However, it has yet to focus on attracting FII,” the expert said.
Just few foreign investment funds remaining in Vietnam are successful, including Vietnam Enterprise Investment Limited (VEIL).
Beginning operations in Vietnam in 1995, the fund has so far managed more than $65 million, 80 per cent of which has been disbursed in purchasing shares in listed companies, and taking part in the establishment of new firms as a founding shareholder.
“Our investment chiefly focuses on domestic enterprises because we’ve realised that they will be one of the main factors for Vietnam’s economic development. In other words, Vietnam should have its own big domestic enterprises if it is to compete in the international arena,” said Dominic Scriven, director of Dragon Capital - VEIL’s management arm.
“We will continue investing in domestic enterprises, especially those that operate in banking and finance, consumer goods processing, farm products, real estate and information technology,” he said.
According to experts, the scale of most domestic enterprises, including joint-stock commercial banks (JSCBs), remains small in terms of capital, technology, management, and human resources.
For instance, even Vietnam’s largest JSCB, Asia Commercial Bank, has chartered capital of VND424 billion ($27.5 million), equivalent to that of a foreign bank branch in Vietnam.
“Vietnamese enterprises, JSCBs or manufacturing units, will surely be lost in the international competition if they do not get bigger as part of regional and global integration,” Scriven said.
Don Lam, managing partner of VinaCapital Asset Management - the management arm of the newly-established Vietnam Opportunities Fund (VOF) - said FII was very important for domestic enterprises that were suffering a dire shortage of capital.
“Vietnam has been successfully trying to attract FDI but we have not seen a lot of effort in terms of attracting FII.
“Of course, both FDI and FII are very much needed for the country’s economic development. However, only FII can help Vietnam create its own large enterprises,” he said.
FDI, which is subject to foreign investment law, has been poured into the establishment of wholly foreign-owned projects or foreign joint ventures. FDI contributes to the country’s production industry, increasing its export turnover as well as creating jobs for local people, but it does not impact on Vietnam’s big firms.
FII sources, meanwhile, can contribute capital to domestic enterprises, helping them improve competitiveness.
Don Lam said he had just returned from a conference of fund managers in Hong Kong, where fund managers around the world had come to discuss investment opportunities.
“Collectively, they have $6 trillion under their management. Imagine if Vietnam was able to attract 1 per cent of their interest, which translates to $60 billion.
“In order to attract more FII to the country, Vietnam needs to work hard on the legal system and corporate governance,” Lam said.