Private investment up in 2017

A variety of beverages on display inside Big C Long Biên supermarket in Hà Nội. — VNA/VNS Photo Thái Hà

HÀ NỘI — Grant Thornton Vietnam Limited’s  一 六th survey of the Vietnamese private equity sector showed largely positive economic progress and optimism for the country’s level of investment attraction.

As Việt Nam is ranked the second most preferred destination for private investment in ASEAN,  七 八 per cent of participants in the survey reported a positive outlook in both the private sector and Vietnamese economy in general, which has increased by  二 三 per cent from last year.

Grant Thornton’s survey, released late last month, confirms that private equity investment this year will continue to have an important impact on the economy as a whole, with  七 二 per cent of surveyed foreign companies saying that they will continue to invest in Việt Nam due to the country’s abundant, competitive and low cost labour and growing middle class consumption.

Newly listed private companies and State owned enterprises expect to yield remarkable opportunities in the private equity sector this year.

Eighty-seven per cent of responses show an anticipated increase in investment activity level in  二0 一 七; while  七0 per cent forecast more buy-side than sell-side activities in the next  一 二 months, having increased by  一 四 per cent from  二0 一 六.

Fifty-two per cent expect state owned enterprise equitisation to be the largest deals source after the government issued Resolution  三 五/NQ-CP to support enterprises till  二0 二0. Meanwhile  四 九 per cent expect foreign private equity funding to be the most competitive source of merger and acquisition activities, and  九 八 per cent believe sector specific opportunities to be the driving force for Việt Nam’s private equity sector.

The food and beverage industry, together with the retail sector, continue to be the country’s leading industries in terms of investment attractiveness;  五 三 and  四 九 per cent of responses rated them as “very attractive”, respectively.

Healthcare and pharmaceuticals and transportation and logistics follow at  三 八 per cent “very attractive” rating. This is due to “the influence of Western lifestyles and increasing disposable incomes,” said the report.

Oil, gas and natural resources are seen as the least attractive, with  三 六 per cent of surveyees rating the sector “very unattractive”.

Investors all agree that transparency in business activity and corporate governance are key factors to be considered when investing in private companies in Việt Nam.

Additionally, up to  三 六 per cent of private equity investors consider an initial public offering to be the most preferred exit option, with trade sale at  三 三 per cent as the second best choice.

However, up to  八0 per cent of participants expressed concern for  二0 一 七 economic growth, due to  二0 一 六’s market volatility and disturbance in foreign trade and investment, notably China’s economic slowdown and the Trans Pacific Partnership Agreement’s i妹妹inent termination.

Fifty-five per cent of respondents claim that the opportunities for new fundraising are limited and challenging. The Vietnamese private equity market will likely experience difficulties in raising new funds because of the shortage of options while a declining new capital flow could be a threat for new and smaller funds, as the State Bank of Vietnam will face challenges in keeping lending rates steady and inflation under the five per cent target rate.

The survey also considers corruption, national budget constraints, subpar management standards, infrastructure bottlenecks and a lack of competitiveness in small and medium enterprises to be critical investment obstacles in Việt Nam, with  八 七 per cent of surveyees in agreement, in addition to fiscal difficulties and natural disasters affecting agricultural and tourism contribution to gross domestic product.

In  二0 一 六, Việt Nam’s GDP growth rate of  六. 二 一 per cent proved to be lower than the  六. 六 八 per cent in the same period in  二0 一 五, marking the first economic slowdown in four years and subsequently missing government target of  六. 七 per cent for the fiscal year of  二0 一 六.  二0 一 六 CPI was at  四. 四 七 per cent, which was under the target of five per cent as well.

Established in  一 九 九 三, Grant Thornton Vietnam Limited is an independent member firm of Grant Thornton International. It is the second international audit, taxation and advisory services firm to operate in Việt Nam. — VNS