Private equity and venture forum attracts investment into Vietnam

The third Private Equity & Venture Forum 2019 brought leaders in the region for a day of cutting-edge industry debate on the latest investments trends and opportunities for private market investors in Vietnam.

The private equity and venture forum has lauded Vietnam as an investment destination

Talking with VIR, Vanessa Capdevielle, representative from Singapore based Blackpeak, confirmed that the consumer, fintech, and logistics are some of the most interesting fields for foreign investors.

“In the past two to three years, as an investment consultant, we have seen a lot of enthusiasm among foreign investors for the Vietnamese market,” Capdevielle said.

One of the largest challenges for foreigners, according to Capdevielle, was the lack of mid-level management and transparency.

Moreover, the global community has limited knowledge about the country’s economy and society, therefore they are still hesitant and take longer to make an investment decision.

Despite the fact that the Vietnamese government had been successful in improving its system, the administrative procedures were still called “complicated” and bureaucracy remains a barrier for foreign investors.

However, compared to other neighbouring countries like Indonesia, Vietnam has been more consistent in attracting foreign investors with a range of policy and legal improvements.

Talking at the forum, Thai Van Linh, director of Vingroup Venture (under Vingroup), shared issues related to Vietnam’s investment attractiveness, stressing the country's advantages in driving foreign investment into different fields such as consumer, retail, finance, logistics, healthcare, and education.

“International and global investors may see Vietnam as a market which is offering low-cost labour force, however, I must stress that Vietnam has also skilled and qualified labour. This is also one of the points of attraction for foreign investors,” Linh said.

Many investors at the forum also agreed that among the 10 Asian countries, Vietnam is one of the most open economy, after Singapore.

Pete Vo, managing director of CVC Capital Partners, in Southeast Asia, Vietnam has now the best investment prospects even though it opened up to trade later than other economies. He lauded the country's potential in the fields of consumption, finance, e-commerce, fintech, and logistics.

At the forum, investors also emphasised the advantages of Vietnam, such as young population, abundant and qualified human resources, and low energy prices compared to other countries in the region.

Regarding international integration, Vietnam has signed and fully participates in bilateral and multilateral free trade agreements with the US and the EU – the world's leading economies. In addition, among more than 200 international trade partners, Vietnam now has an export turnover in excess of $1 billion with around 30 markets. These are extremely positive results for an economy based mainly on exports and FDI like Vietnam.

Vietnam has also emerged as a spotlight for Japanese investors. According to Yotari Tokuo, principal of Advantage Partners, Vietnam has an important political and geographic position and the Vietnamese government has been particularly encouraging of foreign investment inflows.

Figures from the Foreign Investment Agency under the Ministry of Planning and Investment showed that in 2018, Japan was one of the three largest investors in Vietnam with around $8.59 billion, accounting for 24.2 per cent of the total FDI into Vietnam.

Chad Ovel, partner from Mekong Capital, said that foreign investors have been finding it easier to set up a company in Vietnam with the administrative and legal improvements.

“I must say that investors from Korea, Japan, Hong Kong, and the China are very active in exploring investment opportunities in Vietnam. They really want to invest and this is a good time for them to enter Vietnam,” Ovel said.

Investors also said that as Vietnam’s economy advances and consumer market expands, private market investor sentiment has been growing more rapidly than actual investment. Nevertheless, there are signs of a tipping point on the horizon. This is supported by a series of recent private equity deals which reveal a maturation process on several fronts.

Vietnam is already a significant beneficiary of trade uncertainties in the region and this is only intensifying in markets that have historically been the destination of choice for strategic offshore operations.

It is predicted by experts that cross-border deal-making will increase as manufacturing powerhouses, as well as regional and global investors, shift their facilities to Vietnam or increase investment in the country.

In addition, the role of corporate investors, including SOEs, private conglomerates, and regional players, has changed significantly.

From private equity beneficiaries in their infancy to strong partners in co-investments and exits, these companies have grown into leading enterprises. Now, many have created dedicated investment platforms and sector-focused funds to leverage their industry expertise.

Last but not least, as deal sizes inflate and new openings emerge in a winding value chain, Vietnam’s consumer economy has started attracting a wider range of investors. Private equity is uniquely positioned to exploit this opportunity, with Vietnamese companies finally reaching the size where their growth capital requirements are attracting large strategic investors and international private equity.