Foreign Investment Funds Help Develop Vietnamese Enterprises

3:26:33 PM | 7/8/2005

The involvements of foreign investment funds into Vietnamese enterprises will not only help local firms to have more funds for carrying out their business operations but also provide them with professional knowledge, management and marketing skills. The funds will also help local firms to seek partners, customers and lists on the stock market.

Help develop Vietnamese firms

In recent years, many foreign investment funds have become involved in Vietnam’s financial market, especially the local stock market. They take part in a lot of different economic sectors.

Beside the long-existing and well-known Growth Fund, the Vietnam Opportunity Fund (VOF) has come to Vietnam and invested US$25 million in more than 30 companies and projects in the country since September 2004.

Don Lam, the VOF general director, said the projects the fund invests in must have a long-term vision, from three to five years. The fund’s most concerned sectors include finance, real estate, and consumption goods. In 2004, the fund was recognized as the most effective foreign investment fund in Vietnam with the growth of 24.5 per cent.

IDG Ventures Vietnam, one of the top risk investment funds in the world, set up its office in Vietnam in August 2004. The fund has invested more than US$600 million in hundreds of companies in the world for past ten years.

The fund has met with a number of hi-tech and informatics companies to seek investment opportunities since its foundation in Vietnam, said IDG Ventures general director Nguyen Bao Hoang. It has invested in four companies, including two informatics firms, one software firm and another specializing in online games.

Mekong Capital (MEF) is a private fund, specializing in buying shares of leading private companies in Vietnam, Laos and Cambodia. The fund, which came to Vietnam in April 2002 with total investment capital of US$18.5 million, has helped local companies obtain annual average growth of 28 per cent.

Funds investing in potential projects only

MEF consider the most important point of the potential investment project is the ability of the shareholders and managers, said Chris Freund. Thus, the fund will invest in any industry in Vietnam that has comparative-advantages as well as being suitable with the fund’s criteria.

Chris Feund said most sectors now changes very fast, therefore, MEF will mainly concentrate on well-managed firms rather than on those whose sector is developing at the moment.

Nguyen Bao Hoang, general director of IDG Venture said the projects must conform to the fund’s criteria, be it a private, joint stock or state-owned firm.

IDG will continue to invest in software development, e-commerce, telecom and biotechnology projects this year.

Don Lam of VOF said the fund would pour most of their money in Vietnamese firm in spite of joint venture or 100-per-cent-foreign firms. VOF will only put eye on big projects with total investment capital from US$1 million this year. Last February, the fund bought shares in South Kinh Do Joint Stock Company. It plans to invest US$20-30 million in 10 to 20 companies in 2005.

Creating opportunities to strategic investors

Regulation No.187/2004/ND-CP stipulates that all the initial public offerings (IPOs) must be made via securities firms, which means foreign individual and institution investors can take part in share auction in a fair way.

The regulation, however, will be a hindrance for foreign investors, said Chris Freund. He explained that the strategic investors would lose their advantages in negotiations to buy shares in local enterprises.

Freund said poorly performing companies which will be re-organized should make separate share issuance to strategic investors.

The foreign investment funds have made great contribution to Vietnamese firms as well as the local stock exchange. However, Vietnam should expand foreign shareholding proportion in local companies to attract more foreign investors, helping Vietnamese firms to enhance competitiveness.