Viet Capital Bank, Viet Capital Securities and Viet Capital Fund Management are jointly organising ‘Vietnam Access Day’ on October 23-24 at the Intercontinental Hotel in Ho Chi Minh City. It is envisioned as an event where investors and business executives can network, learn and be inspired. Viet Capital Securities CEO To Hai talks to VIR’s Tuong Thuy about the conference.
Why did Viet Capital decide to stage Access Day now?
The 2006-2007 period saw a very high frequency of international-level workshops and conferences on investment because the country was a good destination for investment with many success stories. However, the global economic crisis started in 2008 and amid prolonged global uncertainties there has not been as many events as before.
Actually, international investors are still interested in Vietnam, but they lack information. Generally speaking, international financial institutions do not put capital into a market where they cannot anticipate risks or don’t clearly know the way the economy will go in the next few years. In order to boost international investors’ portfolios, a must is to provide them with updated information and to hold networking meetings between them and Vietnamese companies. Vietnam Access Day aims to achieve this goal, though it is merely a corporate-level forum.
What is your assessment of foreign capital inflows during Vietnam’s economic restructuring process?
If we see Vietnam as a hyper-sized corporation, we can see that this huge company has been running ineffectively recently. Its banking sector is facing increasing bad debts. Domestic enterprises are now in the red and facing production stagnation. The whole economy is undergoing slow growth . Given an unhealthy financial picture, inefficient business operations and high risks of capital losses, restructuring is a must. In addition to drawing lessons from the failure in the past for better development, the huge corporation must be fuelled by new resources for recovery. It is essential.
However, domestic resources are limited and have been hit by the prolonged global crisis. Given the limited resources at home, international capital flows for Vietnam can shoulder this important mission during the restructuring period and are expected to play the role of a catalyst to drive the Vietnamese economy back to the economy back on a growth trajectory.
More investors are starting to discover Vietnam’s unlimited potential
But if you look back, you can see that many foreign investors have not been not very successful in the promised land of Vietnam. Why?
Some of the financial institutions operating in Vietnam are ones with hundreds of years of development. They have been operating all over the world and accumulated numerous experiences. But it’s true that a majority of foreign investors are not very successful in the Vietnamese market. I may personally tell some reasons, both subjective and objective.
First, after joining the World Trade Organization, Vietnam was considered a rising star and international investors did not want to be slow for a feast. They did not have enough time to think of every investment decision for fear of being a latecomer.
Secondly, as Vietnam had become a magnet for international investments, fund managers found it easy to raise funds. The shareholders even wanted to put pressure on fund managers to put Vietnamese equities into the portfolios. Easy mobilisation resulted in easy investment decisions, which in turn proved inefficient. The investors then got stuck and failed to withdraw their capital, thus suffering losses.
Third, it’s true that the global economic crisis has swept over every corner in the world, and investment funds have suffered losses all over the world, not just in Vietnam. One thing here: Vietnam is a marginal market with larger risks, so there have been more losses than elsewhere.
The losses have already been seen. Is it easy to convince foreign investors to continue to invest here?
Many funds bought shares in Vinamilk when it was still a small-sized dairy company. Vinamilk is now worth up to $3 billion and these investments have grown a dozen times. This means a sound investment decision can beat uncertainties and a systematic downturn. One perception is that losses on investments come from a wrong selection of companies instead of wrong selection of countries.
During the Asian financial crisis in 1997, many people said that international investors would never return to Indonesia, but what happened later was quite different. The most populous country in South East Asia is currently still a preferred destination of international investors. A similar scenario would be for Vietnam.
Why are you confident about this? What is your message to international investors to convince them to pour money into Vietnam?
Through my meetings with foreign investors, I see they acknowledged that Vietnam and Indonesia share similarities in strong points they have to offer. These pluses do not change over time or depend on the ups and downs of the economic cycle. They include a young population, abundant labour forces, a vast consumer market – Vietnam has 90 million people. Therefore, the attractive sectors are consumer goods, retail, healthcare, and some segments in agriculture, communications and technology. During the upcoming Vietnam Access Day, speakers and guests will share with investors their ideas about the potential and opportunities in the high-potential fields.
Exports and foreign investment have been driving forces for Vietnam’s growth over years. You say Vietnam now needs new capital resources for growth. So, what can the export sector promise?
We know that a Nike product is made in Vietnam and an Apple Iphone 4 is made in China, and they are sold worldwide. Since they are already global brands, where they are made doesn’t count much for global consumers if authorised warranty is available.
In fact, it is difficult for made-in-Vietnam products to become a global brand or global symbol like that now. I mean the natural resources of a country are not all needed to assure sustainable growth. Brands are very important. For example, Vietnam is the world’s leading exporter of tra and basa fish thanks to its advantages, but during the economic crisis, those export firms who do not make good branding have lost some market share. Even when the brand has been established, nothing can guarantee that global consumers would select made-in-Vietnam products because they have many other options.
Meanwhile, private enterprises providing essential food products for the domestic market of 90 million people still enjoy impressive growth in the crisis.
Vietnam’s export competence is mainly based on its advantages endowed by the nature, especially its geographic location and demographic characteristics. These strengths will continue their role, but creating synergies and adding values are necessary. At present, Vietnam is still attractive to foreign investment primarily due to its low labour cost.
By Tuong Thuy